The situation described in the book as "smart for one, dumb for all" occurs when:
A. individuals make better decisions when they are part of a group than when they are alone.
B. individuals act rationally, so there are no unexploited opportunities for society as a whole.
C. individuals act rationally, but there are still unexploited opportunities for society as a whole.
D. individuals make better decisions when they are alone than when they are part of a group.
Answer: C
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Why is the demand for real money balances related to the nominal interest rate, rather than the real interest rate?
What will be an ideal response?
If a bank had demand deposits of $50 million and it faced a 25 percent required reserve ratio, it would be able to have a maximum amount of how many dollars worth of loans?
a. $50 million b. $37.5 million c. $25 million d. $12.5 million
If steak is a normal good and its price rises:
A) the amount purchased may either increase or decrease depending on the relative importance of the income and substitution effects. B) both the income and substitution effects suggest that less will be purchased. C) the substitution effect suggests more will be purchased, but the income effect suggests less will be purchased. D) the income effect suggests more will be purchased, but the substitution effect suggests less will be purchased.
The rate of return in loanable funds describes the:
A. cost of borrowing. B. the profit firms should make when investing borrowed funds. C. interest rate on loans. D. expected profit that a project will generate per dollar invested.