If Economists Are Making the Assumption That Business People Try

question 214

Multiple Choice

If economists are making the assumption that business people try to maximize profits, the best way to determine whether this assumption is useful or not is to

• A) see whether it generates accurate predictions about the choices of business people.
• B) ask business people whether it is true or not.
• C) find out whether U.S. businesses are more profitable than European businesses.
• D) take a survey of people and see if they agree with this assumption.

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Definitions:

Nominal Variable

A variable measured in terms of monetary value that has not been adjusted for inflation, reflecting the current price levels.

Velocity of Money

The rate at which money circulates in the economy, typically measured as the ratio of GDP to a country's total supply of money.

Real GDP

An economic metric that quantifies the value of all finished goods and services produced within a country's borders in a specific time period, corrected for changes in price or inflation.

Money Supply

The complete financial resource pool available in an economy at a particular period.