Traditional economics assumes that:
A. the context of choices affects behavior.
B. laissez-faire is the right precept to apply.
C. the way choices are presented doesn't matter.
D. people are predictably irrational.
Answer: C
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When people are holding money in excess of their demand for real money balances ________
A) the nominal interest rate will fall B) they increase their purchases of goods and services C) the central bank buys bonds to correct the imbalance D) all of the above E) none of the above
An increase in government spending without an accompanying increase in taxes
A) does not increase aggregate demand. B) would effectively eliminate an inflationary gap. C) causes investment spending to increase. D) requires additional government borrowing.
All solutions to market failures in markets for public goods or common resources:
A. try to force the internalization of externalities. B. must be provided by the government. C. are not perfect, and total surplus cannot be maximized in these markets. D. need to be accepted by the affected parties to be effective.
The worst and most difficult to extract resources are used first.
Answer the following statement true (T) or false (F)