Figure 12.6: IS-MP Curve

question 111

Multiple Choice

Figure 12.6: IS-MP Curve
-Start from any equilibrium in Figure 12.6 to answer the following question. In 1980, U.S. inflation hit about 14 percent; Federal Reserve chairman ________ engineered a decline in inflation by ________ rates, shown in the figure as movement from point ________.

• A) Volcker; raising inflation; b to c
• B) Bernanke; raising interest; b to d
• C) Volcker; lowering interest; c to b
• D) Volcker; raising interest; b to c
• E) Greenspan; lowering interest; a to b

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Definitions:

Priming

A psychological effect in which exposure to a stimulus influences a response to a subsequent stimulus, without conscious guidance or intention.

Insight

The capacity to gain an accurate and deep intuitive understanding of a person or thing, often leading to a sudden realization.

Availability Heuristic

A cognitive shortcut that relies on immediate examples that come to a person's mind when evaluating a specific topic, concept, method, or decision.

Representativeness Heuristic

Assumption that any object (or person) sharing characteristics with the members of a particular category is also a member of that category.