Expected utility theory assumes that individuals have utility functions over a composite consumption good.
Answer the following statement true (T) or false (F)
False
Rationale: Expected utility theory assumes the independence axiom -- which implies that there exists a function over consumption that we can treat as a utility function that then allows us to represent tastes using the expected utility form.
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Prior to 1980, member banks left the Federal Reserve System due to
A) the high cost of discount loans. B) the high cost of required reserves. C) a desire to avoid interest rate regulations. D) a desire to avoid credit controls.
If a price decrease of a product significantly raises its revenues, then the absolute price elasticity of demand for that product must be
A) less than one. B) equal to one. C) greater than one. D) an example of unit elasticity.
Means-tested income transfer programs are referred to as
A. In-kind transfer programs. B. Cash transfer programs. C. Social insurance programs. D. Welfare programs.
Refer to Figure 28-5. Consider the Phillips curves shown in the above graph. We can conclude from this graph that
A) ceteris paribus, a fall in the rate of inflation to 5 percent will increase unemployment to 7.5 percent in the short run. B) the natural rate of unemployment in this economy is 5.5 percent. C) the expected rate of inflation in this economy is 10 percent. D) All of the above are correct.