A major factor contributing to the recession of 1981-1982 was
A. an increase in interest rates.
B. an increase in exports.
C. the multiplier effect.
D. an increase in unemployment.
A. an increase in interest rates.
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Which of the following statements is true regarding protocols in various types of auctions?
a. An English auction requires bidders to begin with the highest price. b. A Dutch auction starts with the lowest price any bidder is willing to pay, which is displayed in a one-handed clock. c. In a Dutch auction, the first buyer to bid gets the item at the price shown in the one-handed clock. d. In a second-price auction, the second-highest bidder gets the item.
Suppose the economy has an inverted yield curve. According to the liquidity premium theory, which of the following interpretations could be used to explain this?
A. The term spread has increased. B. Investors are indifferent between bonds with different time horizons. C. Interest rates are expected to rise in the future. D. Investors expect an economic slowdown.
When the anticipated rate of inflation is 2 percent and the real rate of interest is 4 percent, the nominal rate of interest is
A. 0 percent. B. 1 percent. C. 2 percent. D. 6 percent.
Your roommate, Serafina, a psychology major, said, "The problem with economics is that it assumes that consumers and firms always make the correct decision. But we know that everyone's human, and we all make mistakes." Do you agree with her comment?
A) Yes, I agree with her. One cannot make predictions about economic behavior because in reality people make incorrect choices in many situations. B) I disagree with her. Economics does not study correct or incorrect behaviors but rather it assumes that economic agents behave rationally, meaning they make the best decisions given their knowledge of the costs and benefits. C) Yes, I agree with her. Economic theory should allow for irrational behavior so that we can have more reliable predictions. D) I disagree with her. If we cannot assume that decisions are correct, then we will not be able to examine the moral implications of these decisions.