The Fact That Private Sector Economic Agents Cannot Be Systematically

question 3

Multiple Choice

The fact that private sector economic agents cannot be systematically fooled by economic policymakers is implied by

• A) the Phillips curve.
• B) time inconsistency.
• C) commitment.
• D) the rational expectations hypothesis.

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Definitions:

Bounded Rationality

A concept suggesting that individuals make decisions based on the limited information they have and their cognitive limitations.

Problem Identification

The initial step in the problem-solving process that involves recognizing and defining a problem or challenge that needs to be addressed.

Framing

The way information is presented or communicated, which influences how it is perceived and interpreted.

Anchoring Effect

A cognitive bias where individuals rely too heavily on an initial piece of information (the "anchor") when making decisions.