The demonstration effect suggests that people will save less when they
A. recognize that the real interest rate has increased.
B. base their saving decisions on their projections of income and spending needs over their lifetime.
C. base their spending decisions (and consequently their saving decisions) on spending decisions of others who spend more than they do.
D. control their spending in order to save more when the real interest rate increases.
Answer: C
You might also like to view...
Which of the following equations best represents a Cobb-Douglas production function?
A) Y = AK1L1 B) Y = AK3/4L1/4 C) Y = AK1/3L3 D) Y = AK2/3L3/2
In the Fixed Time Effects regression model, you should exclude one of the binary variables for the time periods when an intercept is present in the equation
A) because the first time period must always excluded from your data set. B) because there are already too many coefficients to estimate. C) to avoid perfect multicollinearity. D) to allow for some changes between time periods to take place.
Officers of five large building-materials companies meet and agree than none of them will submit bids on government contracts lower than an agreed-upon level. This is an example of:
a. price fixing. b. vertical restriction. c. a tying contract. d. an interlocking directorate.
An economic analysis of the relationship between proposed legislation affecting major employers in each state and the voting patterns of senators and representatives in Congress on that legislation would fit within the subcategory of economics called:
A. the economics of fiscal policy. B. public choice theory. C. behavioral economics. D. monetarism.