When Economists Say That People Act Rationally in Their Self-Interest

question 22

Multiple Choice

When economists say that people act rationally in their self-interest, they mean that individuals

• A)look for and pursue opportunities to increase their utility.
• B)generally disregard the interests of others.
• C)are mainly creatures of habit.
• D)are usually impulsive and unpredictable.

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Definitions:

Purchasing Power Parity Theory

An economic theory that states that exchange rates between currencies are in equilibrium when their purchasing power is the same in each of the two countries.

Market Basket

A fixed set of goods and services used to monitor changes in price levels and purchasing power over time, often used in calculating inflation.

Exchange Rate

The price at which one country's currency can be exchanged for another country's currency.

Purchasing Power Parity

A theory that compares different currencies through a "basket of goods" approach, aiming to evaluate the relative value of currencies.