Answer the following statements true (T) or false (F)
1. The "hedonic treadmill" of prospect theory suggests that if people's incomes rise and stay at the new higher level, then their feelings of satisfaction also rise and stay at the new higher level.
2. The anchoring effect suggests that when people are made to think of large abstract numbers before they go shopping, many of them will subsequently be willing to pay higher prices for stuff.
3. The endowment effect makes people value things less when they think of those things as their own as opposed to identical things that are not theirs - as in "grass is greener on the other side".
4. "Loss aversion" helps explain why people buy insurance policies with lower deductibles even though the policies are more expensive.
5. The status quo effect suggests that giving people more options is always good for them.
1. FALSE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
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Emily is a writer. She buys pens and paper for $20 and writes a 500-page novel that she sells to a publishing company for $500,000. If the publisher prints 1 million copies that sell for $25 each, what is the contribution to GDP of Emily's novel?
A) $25 million B) $20 million C) $500,000 D) $50,000
Why were traditional Federal Reserve policies ineffective during the 2007-2009 recession?
What will be an ideal response?