Which of the following statements concerning the prisoner's dilemma is TRUE?
A) The player who moves last will always win.
B) Confessing is the dominant strategy for both players.
C) Neither player will pick the dominant strategy.
D) The player who moves first will always win.
B
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When the economy suffers a temporary negative supply shock and the central bank responds by changing the autonomous component of monetary policy to keep inflation at the target inflation rate, then
A) aggregate output drops in the short run. B) output will return to potential output over time. C) aggregate output is stabilized. D) all of the above. E) both A and B.
Which of the following will shift out to the right as productivity increases?
a. Aggregate demand curve b. Aggregate supply curve c. Demand curve d. Supply curve
The economy experiences an increase in the price level and a decrease in real domestic output. Which is a likely explanation?
a. Productivity has increased b. Excess capacity has decreased c. Input prices have dropped d. Government regulations have increased substantially
Consider an individual who plans to buy a new home. He has two options: (i) pay for mortgage insurance (that insures the lender in case the borrower defaults), or (ii) pay the lender a higher interest rate for the mortgage. Describe how these two options are related to the concept of risk premium and the lender's aversion to risk. Why does the interest rate on the mortgage differ in these two options?
What will be an ideal response?