Lindsay and Tim are playing the ultimatum game starting with $100 . Based on the coin toss, Lindsay is the player to propose a division of the $100 . If Lindsay acts as economic theory assumes and Tim acts as experimental evidence shows, Tim will
reject Lindsay's proposal of keeping $99 and offering Tim $1.
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The marginal rate of substitution is
A) the rate at which the consumer will give up one good to get an additional unit of another good while remaining on the same indifference curve. B) the rate at which utility increases as the consumer increases purchases of a good, holding purchases of the other good constant. C) the rate at which a consumer will exchange a good for income holding prices constant. D) None of the above answers is correct.
If the dollar appreciates, perhaps because of speculation or government policy, then U.S. net exports
a. increase which shifts aggregate demand right. b. increase which shifts aggregate demand left. c. decrease which shifts aggregate demand right. d. decrease which shifts aggregate demand left.
Because of increasing opportunity costs, the production possibilities frontier
A. is a straight downward-sloping line. B. at first rises, then falls eventually. C. can be either downward- or upward-sloping. D. is bowed out from (or concave to) the origin.
If the reserve ratio is 15 percent and commercial bankers decide to hold additional excess reserves equal to 5 percent of any newly acquired checkable deposits, then the relevant monetary multiplier for the banking system will be:
A. 4. B. 3½. C. 10. D. 5.