The Use of Psychological Incentives to Solve Commitment Problems Would

question 118

Multiple Choice

The use of psychological incentives to solve commitment problems would be least effective in games played:

• A)repeatedly between strangers.
• B)once between family members.
• C)repeatedly between family members.
• D)once between strangers.

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Definitions:

Gold Production

The process of extracting gold ore from the earth and refining it into pure gold.

Balance of Payments

A record of all economic transactions between the residents of a country and the rest of the world in a given period of time, which includes the trade balance, foreign investments, and loans.

Flexible Exchange Rates

A currency system where the value of a currency in relation to others is determined by the foreign exchange market without direct government control.

Inflation

The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, in order to keep the economy running smoothly.