Matt has $2000 saved for a trip at Spring Break. Over Christmas break he decides to spend $400 of it on gifts instead of putting the gifts on his credit card, thus avoiding interest charges. He gradually replaces it in his savings account over the next two months. An economist would say this behavior is:
A. rational.
B. not observable.
C. utility minimizing.
D. irrational.
Answer: A
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Suppose a person cashes his payroll check and holds all the funds in the form of currency. Everything else held constant, total reserves in the banking system ________ and the monetary base ________
A) remain unchanged; increases B) decrease; increases C) decrease; remains unchanged D) decrease; decreases
Suppose that a nation has adopted a fixed exchange rate with another country, and has a persistent trade deficit. What is most likely to happen?
a. a gradual increase in the value of its currency b. a gradual decrease in the value of its currency c. a "run" on its currency and a sudden appreciation d. a "run" on its currency and a sudden devaluation
In a famous series of commercials, the International Ladies’ Garment Workers Union (ILGWU) urged buyers to “look for the union label” and to avoid buying clothes not made by ILGWU members. Through the commercials, the ILGWU tried to attain its goals by
A. restricting the number of ILGWU members. B. featherbedding. C. raising the marginal revenue products of ILGWU members. D. creating lower prices for goods made by ILGWU members.
The aggregate demand curve slopes downward in part due to the:
A. positive relationship between the price level and exports. B. negative relationship between the price level and net exports. C. negative relationship between the price level and imports. D. All of these are true.