All of the following are true, except
a. Bubbles are prices that cannot be explained by normal economic forces
b. Many economists don't think bubbles exist
c. Many economists have a clear idea about how to model bubbles
d. All of the above are true
c
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Suppose you rent an apartment and are worried about a break-in that results in theft of your property. Suppose your monthly consumption level is currently $4,000 but a break-in would result in you having to finance your purchase of replacement property -- and this would reduce your current consumption to $2,000 per month. There is a 10% chance of a break-in. a. On a graph with "consumption" on the horizontal and "utility" on the vertical axis, illustrate a utility/consumption relationship that is consistent with risk averse tastes. b. On your graph, illustrate the utility in the "good" state, the utility in the "bad" state and the expected utility of facing the gamble. c. Which of these changes when the probability of a break-in increases to 20%?
d. A renter's insurance policy consists of a premium p and a benefit level b. What is (b,p) for full, actuarily fair insurance before and after the increase in risk? e. True or False: You are more likely to buy actuarily fair full insurance after the increase in risk than before. What will be an ideal response?
Which of the following is an automatic stabilizer that moves the federal budget toward deficit during an economic contraction and toward surplus during an economic expansion?
a. Personal income tax revenues. b. Corporate income tax revenues. c. Unemployment benefits. d. All of these.
An economic outcome is said to be efficient if the economy is
a. using all of the scarce resources it has available. b. conserving on resources, rather than using all available resources. c. getting all it can get from the scarce resources it has available. d. able to produce more than what is currently being produced without additional resources.
Which of the following is NOT given in the video as an example of a real shock?
A. high inflation B. bad weather C. wars D. changes in the price of oil