According to the bounded rationality hypothesis, an individual confronting a large number of complicated choices is most likely to respond by
A. using a simple rule of thumb to choose among a subset of easiest-to-evaluate options.
B. utilizing readily available empirical evidence to assist in evaluating every option.
C. using the ceteris paribus assumption to assist in simplifying and examining each of the possible options.
D. assessing every available choice by developing sophisticated theories regarding each option.
Answer: A
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Both presidents Kennedy and Reagan proposed significant cuts in income taxes. Opponents of these tax cut proposals argued that
A) it would be better to cut taxes on corporate profits. B) cutting state sales taxes, rather than federal income taxes, would result in greater economic efficiency. C) while the tax cuts would result in greater economic efficiency, there was too much opposition to the tax cuts in Congress. As it turned out, Congress ultimately approved both tax cut proposals. D) the tax cuts would benefit high-income taxpayers.
High-powered money consists of
A. all deposits at the Fed. B. bank reserves minus vault cash. C. bank reserves plus currency held by the nonbank public. D. deposits at the Fed plus vault cash.
The increased use of PayPal will decrease the velocity of money
a. True b. False Indicate whether the statement is true or false
Bank of Mt. Etna has $500 million in deposits. Bank of Mt. Etna is meeting its reserve requirement and has no excess reserves. It has $75 million in reserves. Bank of Mt. Etna faces a required reserve ratio of
A. 15%. B. 25.5%. C. 45%. D. 47.2%.