If One Does Not Pay Attention to the Underlying Probability

question 34

Multiple Choice

If one does not pay attention to the underlying probability of an event occurring, faulty decisions are made due to

• A)ignoring the base rate.
• B)the framing effect.
• C)the representativeness heuristic.
• D)"thin-slicing."

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Definitions:

Credit Availability

The ease with which individuals and businesses can obtain loans and other forms of credit from financial institutions.

Liquid Assets

Assets that can be quickly converted into cash with little impact on their value.

Consumption Rate

The proportion of income or resources that is spent on consumption rather than saving.

Savings Rate

The proportion of disposable income that is saved rather than spent on consumption, typically expressed as a percentage.