Figure 28-1 -Refer to Figure 28-1. Suppose That the Economy Is Currently

question 74

Multiple Choice

Figure 28-1
-Refer to Figure 28-1. Suppose that the economy is currently at point A on the short-run Phillips curve in the figure above, and the unemployment rate at A is the natural rate. If the economy was to move to point C, which of the following must be true?

• A) The economy is producing a level of GDP equal to potential GDP.
• B) Aggregate demand must have decreased.
• C) Equilibrium GDP at point C must be above potential GDP.
• D) The Fed conducted contractionary policy to cause the move.
• E) The Fed sold treasury bills to cause the move.

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Definitions:

Scapegoat

Individual or group that becomes the target for anger and frustration caused by a different individual or group or some other set of circumstances.

Frustration-Aggression Hypothesis

A psychological theory proposing that aggression is often the result of blocking, or frustrating, a person's efforts to attain a goal.

Catharsis

The process of releasing, and thereby providing relief from, strong or repressed emotions, often through art, drama, or verbal expression.

Stereotype Threat

Feeling that we will be judged and treated in terms of negative stereotypes of our group, and that we will inadvertently confirm these stereotypes through our behaviour.