The Classical Model Is Appropriate for Analysis of the Economy

question 78

Multiple Choice

The classical model is appropriate for analysis of the economy in the

• A)long run, since evidence indicates that money is not neutral in the long run.
• B)long run, since real and nominal variables are essentially determined separately in the long run.
• C)short run, provided money is not neutral.
• D)short run, provided real and nominal variables are highly intertwined.

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Definitions:

Arousal Hypothesis

A theory suggesting that there is an optimal level of arousal for optimal performance, with too little or too much arousal leading to decreased performance.

Spillover Effect

The phenomenon in which responses to one stimulus are influenced or transferred to another, synonymous context or aspect of life.

Spillover Effect

A situation where an event or phenomenon in one context causes effects to spread beyond its immediate boundaries into another context.

Two-factor Theory

A psychological theory that explains emotions as a result of physiological arousal and cognitive labeling of the cause of the arousal.