Use the Following to Answer Questions

question 16

Multiple Choice

Use the following to answer questions:
-(Figure: Fiscal Policy I) Refer to Figure: Fiscal Policy I. Suppose that this economy is in equilibrium at E₂. If there is a decrease in government purchases, _____ will shift to the _____, causing a(n) _____ in the price level and a(n) _____ in real GDP.

• A) AD_2; left; increase; decrease
• B) AD_2; left; decrease; decrease
• C) AD_1; right; increase; increase
• D) AD_1; right; decrease; increase

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Definitions:

Criticizing Ideas

The process of evaluating the merits, faults, or value of thoughts and propositions through analysis and judgment.

Functional Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used, hindering problem-solving and creativity.

Mental Set

A cognitive framework or mindset that represents a person's approach to solving problems based on past experiences and perceptions.

Rigid Mental Set

A fixed and inflexible mindset that hinders problem-solving and the ability to adapt to new situations or information.