The Assumptions of a Theory

question 39

Multiple Choice

The assumptions of a theory

• A)must be realistic if the theory is to be of any use.
• B)are assumed to be true even when empirical observation rejects the predictions of the theory.
• C)are not necessary for the scientific approach.
• D)are supposed to be as unrealistic as possible.
• E)are indirectly refuted if and when the theory itself is rejected by empirical observation.

Describe the concept of the liquidity trap and its implications for monetary policy.

Identify the factors influencing the effectiveness of monetary policy in recessionary periods.

Recognize the impact of financial regulations on the banking sector and financial crises.

Understand the role and implications of TARP during the financial crisis.

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Definitions:

Unionized

Referring to workers or an industry segment that is organized into a union, which negotiates wages, work conditions, and other employment terms on behalf of its members.

Excess Supply

The situation in a market where the quantity of a good or service offered by producers exceeds the quantity demanded by consumers at the prevailing price.

Union Shop

A workplace where all employees must become members of a labor union within a specified period after being hired.

Negotiates

The process by which parties come together to discuss, bargain, and reach a mutually acceptable agreement.