Empirically, there is a close positive relationship between domestic savings and investment. This is consistent with what we should expect to observe in
a. a closed economy.
b. the Mundell-Flemming model with perfect capital mobility.
c. the Mundell-Flemming model with perfect capital mobility and flexible exchange rates.
d. the Mundell-Flemming model with perfect capital mobility and fixed exchange rates.
e. none of the above.
A
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Behavioral economics extends traditional economic models by
A) including insights from psychology and human cognition models. B) modeling behavior rather than prices. C) admitting that individuals are irrational. D) admitting that incentives are very important.
What is "market signaling"?
What will be an ideal response?
If people care about relative consumption rather than absolute consumption, then:
A. there is little need for government intervention in markets. B. their choices will lead to an efficient allocation of resources. C. their behavior will be consistent with traditional economic models. D. individuals' decisions need not lead to socially optimal outcomes.
A monopolistically competitive firm chooses
A) both the quantity of output to produce and the price at which it will sell its output. B) the price of the product it sells but market forces determine the quantity it will be able to sell. C) the quantity of output to produce but the price of the product it sells is determined collectively by all firms in the industry. D) the price of the product it sells but the quantity of output to produce is agreed upon by all firms in the industry.