When There Is an Inflationary Gap

question 199

Multiple Choice

When there is an inflationary gap:

• A)​Real output exceeds the natural level of real output.
• B)​Real output equals the natural level of real output.
• C)​Real output is less than the natural level of real output.
• D)​Any of the above is possible.

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Definitions:

Anchoring Heuristic

A cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered (the "anchor") when making decisions.

Adjustment Heuristic

A mental shortcut that involves basing decisions on an initial estimate and making adjustments to that figure to reach a final decision or judgment.

Judgment

involves making considered decisions or forming opinions based on the evaluation of available information and reasoning.

Decision Making

The cognitive process of making choices or selecting options among various alternatives.