Which of the Following Situations Is One in Which the Fed

question 197

Multiple Choice

Which of the following situations is one in which the Fed will potentially pursue expansionary monetary policy?

• A)Potential GDP is forecasted to be higher than equilibrium GDP.
• B)Potential GDP is forecasted to be lower than equilibrium GDP.
• C)Aggregate demand is growing too fast to keep the economy at full employment.
• D)Aggregate demand is growing too slowly and the economy is in danger of producing GDP above full employment.

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Definitions:

Confirmation Bias

The inclination to seek out, comprehend, prioritize, and recall facts in a manner that corroborates one's established beliefs or conjectures.

Framing Effect

A cognitive bias where people decide on options based on whether the choices are presented with positive or negative connotations.

Confirmation Bias

A cognitive bias that influences individuals to favor information or interpretations that confirm their preexisting beliefs or hypotheses.

Preconceptions

Preformed opinions or beliefs, often without basis in fact or experience, that influence one's perception.