In the coordination failure model,how is a particular equilibrium attained?
A) The Federal Reserve picks it.
B) It depends on total factor productivity shocks.
C) It depends on money supply shocks.
D) because people expect it to be the equilibrium.

Question

Quizplus · Accepted Answer

In the coordination failure model, a particular equilibrium is attained because people expect it to be the equilibrium. This is because coordination failure occurs when individuals do not coordinate on a particular equilibrium due to uncertainty about what other individuals will do. Once there is a widespread expectation that a certain equilibrium will be played, individuals are more likely to coordinate on that outcome, leading to its realization. The other options, such as the Federal Reserve picking an equilibrium or money supply and productivity shocks, do not play a role in the coordination failure model.

In the Coordination Failure Model,how Is a Particular Equilibrium Attained