Which pitfall to sound economic reasoning is reflected in a person's view that "pharmaceutical and oil companies are price-gouging the consumers"?
A. Faulty definition
B. Post hoc fallacy
C. Loaded terminology
D. Confusing correlation and causation
Answer: C
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The velocity of circulation grows at 1 percent and real GDP grows at 3 percent. If the quantity of money grows at 4 percent, the inflation rate is
A) 8 percent. B) 4 percent. C) zero. D) 2 percent. E) 10 percent.
In the figure above, a point showing an inefficient production point is point
A) A. B) B. C) C. D) D.
Governments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier?
A) a requirement that the U.S. government buy military uniforms only from U.S. manufacturers B) a requirement that imports meet health and safety requirements C) restrictions on imports for national security reasons D) a requirement that the employees of domestic firms that engage in foreign trade pay income taxes
During the expansion phase of the business cycle, households become optimistic about their future earning capacity as do banks. Nominal interest rates rise during expansions. Mortgage lending could be expected to
A) rise if the change in future earnings is thought to be greater than the change in interest rates. B) stay the same. C) fall. D) fall if the change in future earnings is thought to be greater than the change in interest rates.