The Probability of the States of Nature, After Use of Bayes

question 7

Multiple Choice

The probability of the states of nature, after use of Bayes' theorem to adjust the prior probabilities based upon given indicator information, is called

• A)marginal probability
• B)conditional probability
• C)posterior probability
• D)None of these alternatives is correct.

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Definitions:

Price Level

The mean of current prices for all goods and services generated within the economy.

Keynesian Theory

An economic theory proposing that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.

Equilibrium Interest Rate

The interest rate at which the demand for funds equals the supply of funds in the financial market, bringing the market into balance.

Saving and Investment

Economic activities that involve setting aside money for future use and allocating resources into investments to generate returns.