According to the Theory Based on Rational Expectations and Flexible

question 113

Multiple Choice

According to the theory based on rational expectations and flexible wages and prices,

• A) fiscal policy has less effect on real GDP than monetary policy in the long run.
• B) monetary policy has less effect on real GDP than fiscal policy in the long run.
• C) neither fiscal nor monetary policy influence real GDP in the long run.
• D) only the combination of discretionary fiscal policy and conservative monetary policy can affect real GDP in the long run.

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Definitions:

Nonanalytic Concept Formation

This refers to the process of understanding and categorizing information based on experience or intuition, rather than through analytical or systematic strategies.

Grounded Cognition

The theory suggesting that cognitive processes are deeply rooted in the body's interactions with the world, relying on sensory experiences.

Psychological Essentialist View

The belief that certain categories, particularly living things, have an underlying reality or true nature that one cannot observe directly but gives an object its identity.

Observable Properties

Characteristics or aspects of objects or phenomena that can be detected and measured through the senses or with the aid of scientific instruments.