An application of behavioral economics is:
A. thinking irrationally about costs.
B. time inconsistency.
C. forgetting the fungibility of money.
D. All of these are applications of behavioral economics.
Answer: D
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The figure above shows Ilene's budget line. If her dog, Muffin, runs away and she adopts another cat, named Sphynx, the budget line shown in the figure will
A) become flatter. B) become steeper. C) shift outward (because cats eat less). D) not move.
The subprime financial crisis caused a recession because of the ________ in adverse selection and moral hazard problems and the ________ in housing prices
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
Without reinsurance, insurance companies would be less likely to insure
A. against home fires. B. against home burglaries. C. potential terrorist targets. D. against auto accidents.
If the price index last year was 1.0 and today it is 1.4, what is the inflation rate over this period?
A. 40% B. 4% C. -4% D. 1.4%