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.

---

Definitions:

Attributional Style

A psychological characteristic that describes how individuals explain the causes of events, both positive and negative, in their lives.

Spouse's Behaviors

Actions or reactions exhibited by one's partner or significant other in the context of a marital or similar intimate relationship.

Sunk Costs

Sunk costs refer to expenses that have been incurred and cannot be recovered, often influencing future decision-making in a way that irrationality values these past investments over current and future considerations.

Dating

The process of two people engaging in activities together to explore romantic or sexual interest.