A central feature of behavioral economics is
A. bounded rationality.
B. perfect expectations.
C. irrational expectations.
D. people face no constraints in forming expectations.
Answer: A
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Which of the following is true?
A) If the price of a substitute rises, the demand curve shifts leftward. B) An increase in the cost of producing a good shifts the demand curve leftward. C) An increase in population shifts the demand curve leftward. D) If people expect the price of a good will rise in the future, the demand curve shifts leftward. E) For an inferior good, when income increases, the demand curve shifts leftward.
Both ________ and ________ were financial innovations that occurred because of interest rate volatility
A) adjustable-rate mortgages; commercial paper B) adjustable-rate mortgages; financial derivatives C) sweep accounts; financial derivatives D) sweep accounts; commercial paper
What is the difference between positive analysis and normative analysis?
What will be an ideal response?
Continuing with the same family from the preceding question, suppose a risk neutral insurance company exists to provide vacation insurance. Suppose further that each vacation day requires a constant expenditure, and this expenditure is standard across everybody. This allows us to simplify the problem by considering all payments to be in terms of vacation days. What is the least the insurance
company would charge (in terms of vacation days)? a. 1 b. 2 c. 3 d. 4