Starting from Potential Output, If Firms Become More Optimistic About

question 155

Multiple Choice

Starting from potential output, if firms become more optimistic about the future and decide to increase their investment in new capital, then this will generate a(n) ________ gap and inflation will ________.

• A)recessionary; increase
• B)recessionary; decrease
• C)expansionary; decrease
• D)expansionary; increase

---

Definitions:

Formal Operational

The final stage in Jean Piaget's theory of cognitive development, marked by the ability to think abstractly, logically, and systematically.

Postconventional Level

A stage of moral development in which individuals make choices based on ethical principles.

Moral Development

The procedure by which individuals learn to adopt correct mannerisms and conduct towards fellow community members, guided by the norms, regulations, and legal frameworks of society and culture.

Moral Autonomy

The capability of individuals to make moral decisions guided by their principles and values, rather than external pressures.