A popular video program used to teach economics to primary school children defines opportunity cost as "what you give up to get something." In light of your understanding of opportunity cost, how would you modify this definition?
The video program always gives the children two choices; the choice forgone, therefore, is the opportunity cost. For children of this age and reasoning ability, this is probably a good approach. We know, however, that more than one option is relinquished once a decision has been made. A choice to take a 9 a.m. economics class will mean that you cannot take English, French, math, biology, or philosophy at that time. Our understanding of opportunity cost reveals that it is only the highest valued alternative forgone.
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A major difference between the transactions demand for money and the precautionary demand is that the
A) transactions demand is for emergencies while the precautionary demand is for every day expenditures. B) transactions demand involves expected expenditures while the precautionary demand involves unexpected expenditures. C) transactions demand means that people are foregoing interest but they are not foregoing interest in the precautionary demand. D) transactions demand leads to the purchase of assets while the precautionary demand does not.
Sofia, a political science student, thinks that the government should intervene to revive declining industries like video rentals and print newspapers
The government, she reasons, can resolve the coordination problem of getting the agents in these markets to trade. Do you agree with her? Explain your answer.
Legal reserve requirements specify that banks must hold a certain percentage of their deposit liabilities
a. in currency only. b. as deposits at regional Federal Reserve Banks only. c. either in currency or as deposits at regional Federal Reserve Banks. d. None of the above
Eugene White's 1989 study did NOT find that:
a. an increased willingness on the part of New York banks to supply call loans caused the bull market. b. interest rates on call loans increased by roughly 50% from 1922 to 1929. c. credit was being pulled into the stock market by rising interest rates on call loans. d. White's study found all of these things to be true.