The Standard Cobweb Model Makes the Following Two Assumptions

question 18

Multiple Choice

The standard cobweb model makes the following two assumptions:

• A)Workers are forward-looking, and job adjustments take time.
• B)Workers are myopic, and job adjustments take time.
• C)Workers are forward-looking, and job adjustments are instantaneous.
• D)Workers are myopic, and job adjustments are instantaneous.
• E)Workers are myopic, and retraining of one's skills happens instantaneously.

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Definitions:

Unrecognized Prior Service Cost

Costs related to pension plan benefits that have been earned by employees in prior periods but have not yet been recognized in financial statements.

Pension Expense

The cost recognized in an accounting period related to an entity's pension plan, which includes service cost, interest cost, expected return on plan assets, and any amortization.

Straight-Line Method

An accounting method of depreciation in which an asset's cost is evenly spread over its useful life.

Actuaries

Professionals skilled in assessing the financial impact of risk and uncertainty, utilizing mathematics, statistics, and financial theory to study uncertain future events, especially in the insurance and finance industries.