The Assumption That Individuals Act Rationally Implies That

question 107

Multiple Choice

The assumption that individuals act rationally implies that

• A)people think only of themselves and disregard the well-being of others
• B)people undertake all those activities that yield benefits to themselves
• C)people only consider the costs of an activity to decide whether it is worthwhile
• D)the greater the cost of a charitable deed to a benefactor, the more likely he or she is to perform that deed
• E)people implicitly calculate the costs and benefits of an activity to decide if it is worthwhile

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Definitions:

Money Market

A segment of the financial market in which financial instruments with high liquidity and short maturities are traded.

Demand Curve

A graphical representation showing the relationship between the price of a good or service and the quantity demanded by consumers at various price levels, typically downward sloping.

Recession

A short-lived economic contraction, featuring a reduction in both trade and industrial activities, conventionally confirmed by observing a GDP decrease in two back-to-back quarters.

Money Demand Curve

A graphical representation showing the relationship between the interest rate and the total quantity of money that people hold at various levels of interest.