According to the Natural Rate Hypothesis

question 175

Multiple Choice

According to the natural rate hypothesis:

• A)once inflation is built into expectations, a policy aimed at lowering unemployment below the natural rate would lead to accelerating inflation.
• B)the natural rate of unemployment is above the NAIRU.
• C)once inflation is embedded in the public's expectations, it will stop accelerating.
• D)changes in discretionary policy aimed at increasing GDP will have no impact on inflation expectations.

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Definitions:

Reciprocal Determinism

A concept in psychology that explains how an individual's behavior both influences and is influenced by personal factors and the social environment.

Environmental Influences

External factors that affect an individual’s development and behavior, including physical, social, and cultural factors.

Spotlight Effect

The notion that individuals believe their appearance and actions are under closer watch by others than reality suggests.

Reciprocal Determinism

A concept in psychology suggesting that an individual's behavior is both influenced by and influences one's personal factors and the environment.