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If Expected Inflation Falls but Actual Inflation Remains the Same

question 153

Essay

If expected inflation falls but actual inflation remains the same, what happens to the unemployment rate? Defend your answer.

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Definitions:

Conditioning

A behavioral process whereby a response becomes more frequent or more predictable in a given environment as a result of reinforcement, with reinforcement typically being a stimulus or reward for a desired response.

Surprise

An emotional response to unexpected events or information, characterized by heightened interest and physiological arousal.

Conditioned Emotional Response

A type of learned response in which an emotional reaction is elicited by a previously neutral stimulus through conditioning.

Classical Conditioning

The process of learning through which two stimuli are continually paired; a reaction that starts out being elicited by the second stimulus is in the end prompted by the sole presentation of the first stimulus.

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