Unlike an Upward Inflation Shock,a Negative Shock to Potential Output

question 28

Multiple Choice

Unlike an upward inflation shock,a negative shock to potential output causes

• A) lower output and higher inflation.
• B) higher output and lower inflation.
• C) no output losses.
• D) only temporary output losses.
• E) permanent reduction in potential output.

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Definitions:

Perceived Discrepancies

Refers to the differences or gaps that individuals notice between their current state and their desired state or goals.

Motivated

Driven or inclined to act or engage in certain activities out of interest or need.

Behaviourism

An emphasis on explaining observable behaviour in terms of reinforcement schedules.

Cognitive Events

Mental operations or processes involved in perception, memory, reasoning, and problem solving.