If Credible Low-Money-Growth Policies Were Continually Pursued by the Fed

question 110

True/False

If credible low-money-growth policies were continually pursued by the Fed, nominal wages and prices would eventually fall as the economic agents would expect lower inflation rates over time.

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Definitions:

Counterconditioning

A therapy technique used to replace an undesired response to a stimulus with a desired response, by associating the stimulus with a new, more desirable behavior.

Instinctive Drift

The tendency of an animal to revert to instinctive behaviors that interfere with a conditioned response.

Stimulus Discrimination

The tendency to stop making a generalized response to a stimulus that is similar to the original conditioned stimulus because the similar stimulus is never paired with the unconditioned stimulus.

Extinction

Extinction refers to the process in conditioning where the occurrence of a conditioned response decreases or disappears when the conditioned stimulus is repeatedly presented without the unconditioned stimulus.