According to the misperceptions theory,short-lived shocks may have long-term effects on the economy because of
A)multiplier effects.
B)propagation mechanisms.
C)accelerator effects.
D)automatic stabilizers.

Question

Quizplus · Accepted Answer

The misperceptions theory suggests that short-lived shocks can have long-lasting effects on the economy due to propagation mechanisms. These mechanisms refer to how the initial shock can cause fluctuations in expectations, leading to changes in consumption and investment decisions. These changes can then have ripple effects throughout the economy, amplifying the initial shock and potentially causing long-term economic impacts. Multiplier effects, accelerator effects, and automatic stabilizers are other economic concepts that are not directly related to the misperceptions theory.

According to the Misperceptions Theory,short-Lived Shocks May Have Long-Term Effects