Suppose the Economy Is at a Short-Run Equilibrium GDP That

question 242

Multiple Choice

Suppose the economy is at a short-run equilibrium GDP that lies above potential GDP.Which of the following will occur because of the automatic mechanism adjusting the economy back to potential GDP?

• A)Output will increase.
• B)Prices will decline.
• C)Unemployment will decline.
• D)Wages will rise.
• E)The exchange rate will rise.

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Definitions:

Classical Conditioning

A learning process that occurs when two stimuli are repeatedly paired: a response which is initially elicited by the second stimulus is eventually elicited by the first stimulus alone.

Conditioned Response (CR)

The learned reaction or response to a previously neutral stimulus, after the stimulus has been repeatedly presented along with an unconditioned stimulus.

Unconditioned Stimulus (US)

A stimulus that naturally triggers a reflexive response without prior learning.

Extinction

In behavioral psychology, the gradual weakening and disappearance of a conditioned response when the conditioned stimulus is presented without the unconditioned stimulus.