Which of the Following Are Reasons Why Rational Workers and Firms

question 25

Multiple Choice

Which of the following are reasons why rational workers and firms may form their expectations by looking backward rather than forward?

• A) the existence of long-term wage and price agreements would prevent actual inflation from responding immediately to an acceleration in nominal GDP
• B) if in the past acceleration in nominal GDP has caused inflation, then a current acceleration might be expected to increase inflation
• C) people may have no reason to believe that the acceleration in GDP growth will be permanent
• D) Both A and B.

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Definitions:

Reality Principle

The concept in psychoanalytic theory that the mind functions to mediate between the demanding needs of the id and the external real world.

Ego

In psychoanalytic theory, the part of the mind that mediates between the conscious and the unconscious and is responsible for reality testing and a sense of personal identity.

Personality

The combination of emotional, attitudinal, and behavioral response patterns of an individual, defining their character and psychological identity.

Freud

Sigmund Freud, an Austrian neurologist known for founding psychoanalysis, a clinical method for treating psychopathology through dialogue between a patient and a psychoanalyst.