A behavioral economist:
A. uses models that assumes that people are rational rather than purposeful.
B. tends to use heuristic models.
C. assumes that people are always irrational.
D. uses models that assume that people are purposeful rather than rational.
Answer: D
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If the Fed increases the money supply, then: a. the interest rate declines and the quantity of money demanded increases
b. the interest rate declines and the quantity of money demanded declines. c. the interest rate increases and the quantity of money demanded increases. d. the interest rate increases and the quantity of money demanded declines. e. the interest rate increases but the quantity of money demanded remains unaffected.
The relative cost of achieving a fixed standard of living in different situations is called:
A. a cost of living index. B. compensating variation. C. real income. D. consumer surplus.
The forces of demand and supply ensure that at equilibrium
A. there are no shortages or surpluses. B. there are no shortages, but there may be surpluses. C. there are no surpluses, but there may be shortages. D. there may be shortages or surpluses.
Studies have shown that when people are asked to imagine a hypothetical illness, the amount of money they say they would be willing to pay to avoid getting the illness is ________ they would be willing to pay for a cure if they were already sick.
A. more than B. the same as C. unrelated to the amount D. less than