Figure 26-11 -Refer to Figure 26-11. in the Dynamic Model of AD-AS

question 43

Multiple Choice

Figure 26-11
-Refer to Figure 26-11. In the dynamic model of AD-AS in the figure above, the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues policy. This will result in

• A) unemployment rates higher than what would occur if no policy had been pursued.
• B) inflation higher than what would occur if no policy had been pursued.
• C) real GDP lower than what would occur if no policy had been pursued.
• D) short-term interest rates higher than what would occur if no policy had been pursued.

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Definitions:

Scientific Attitude

An approach to investigations that involve skepticism and openness to change when evidence contradicts beliefs.

Humility

A personal quality characterized by a lack of ego, a recognizing of one's own limitations, and a focus on the needs and accomplishments of others.

Conflicting Evidence

Information or data that contradicts or challenges existing understanding or findings.

Testable Propositions

Statements or hypotheses that can be empirically tested through observation or experimentation to evaluate their validity.