Which of the Following Automatically Works to Eliminate Output Gaps

question 153

Multiple Choice

Which of the following automatically works to eliminate output gaps over time,bringing production back into line with potential output?

• A) Expansionary monetary policy.
• B) Contractionary monetary policy.
• C) Price changes by firms and adjustments to wages.
• D) Efforts by firms to produce in line with potential output.
• E) Government mandates that firms use all their resources.

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Definitions:

Intervention Bias

The tendency to intervene or take action when it might not be necessary, often influenced by the belief that doing something is better than doing nothing.

Availability Heuristic

A mental shortcut that relies on immediate examples that come to a given person's mind when evaluating a specific topic, concept, method or decision.

Simulation Heuristic

A cognitive process where individuals predict outcomes based on how easily they can imagine an alternative scenario.

Attention Bias

The tendency of an individual's perception to be affected by their recurring thoughts at the expense of other stimuli.