Tina Eckstrom and her husband bought a deferred annuity that started paying them $700 a month in retirement benefits. They, along with millions of other people who live on fixed incomes, are examples of:
a. those who are responsible for inflation.
b. the big winners from inflation.
c. the big losers from inflation.
d. the paradox of thrift.
e. stock market losers.
c
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Suppose, after undergoing genetic testing, you discover that you have a health condition that could result in the emergence of a disability which would make it impossible for you to continue to work. The probability of this happening is 50%. Currently your expected lifetime earnings are $5,000,000, but if the disability hits, your expected lifetime earnings will consist primarily of income earned from government support programs -- and will not add up to more than $1 million.
a. Suppose your tastes are state-independent and the function 
can be used to
represent your tastes in the expected utility form. Are you risk averse?
b. What is the highest premium you would pay to get fully insured?
c. What is the equation (in terms of 
-- consumption in the bad state -- and 
-- consumption in the good state) that defines the full menu of actuarily fair insurance contracts?
d. Set up the optimization problem that you would solve as you choose among actuarily fair insurance contracts.
e. Solve the optimization problem. What does this imply will be the insurance contract (b,p) that you buy -- where b is the benefit level and p is the insurance premium?
f. Finally, suppose you had state dependent tastes and that the functions 
and 
allowed us to use the expected utility form to represent your tastes. How does your answer to (e) change?
What will be an ideal response?
The relationship between the output gap and the cyclical rate of unemployment is known as
A) the Phillips curve. B) the LM curve. C) Murphy's law. D) Okun's law.
Use the concept of economic rent to explain how rent controls could have an effect quite opposite to the intention
Opportunity cost is illustrated on the production possibilities curve by a
A) bowed-out shape of the curve. B) shift to the right of the curve. C) shift to the left of the curve. D) movement along the curve.