When People Estimate Confidence Intervals, They Typically

question 92

Multiple Choice

When people estimate confidence intervals, they typically

• A) provide estimates that are too wide.
• B) rely too heavily on the representativeness heuristic.
• C) are not sufficiently confident about their decisions.
• D) provide estimates that are too narrow.

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Definitions:

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing what is lost by choosing one option over another.

Money Demanded

The total amount of money that households and businesses wish to hold at a given time, often influenced by interest rates.

Fed Buys Government Bonds

The action by the Federal Reserve to purchase government securities from the market, which increases the money supply and lowers interest rates.

Banking System Reserves

The portion of deposits that banks must hold in reserve and not lend out, often held at the central bank to ensure liquidity.