Backward induction involves:
A. thinking forward and working backward.
B. starting with the last choice and working backward to determine an optimal strategy.
C. a process of analyzing a problem in reverse.
D. All of these statements are true.
Answer: D
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The purpose of expansionary fiscal policy is to
a. increase output b. prevent hyperinflation c. slow the growth of the GDP d. increase the separation between government and private industry
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
Horatio can produce either a combination of 15 bird houses and 25 wind chimes or a combination of 30 bird houses and 15 wind chimes. If he now produces 30 bird houses and 15 wind chimes, what is the opportunity cost of producing an additional 10 wind
chimes? A) 2 bird houses B) 15 bird houses C) 30 bird houses D) 45 bird houses
Why is the interest rate such an important price in the economy?
What will be an ideal response?