Someone notices that sunspot activity is high just prior to recessions and concludes that sunspots cause recessions. This person has:
A. confused association and causation.
B. misunderstood the Ceteris paribus assumption.
C. used normative economics to answer a positive question.
D. built an untestable model.
Answer: A
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In 2006 Disney had
A) a positive economic profit. B) accounting profits greater than the cost of capital. C) a negative economic profit. D) none of these choices.
The adaptive expectations theory suggests that:
a. the price level that people expect in the future is based on the behavior of prices in the past. b. the unemployment rate adapts immediately to the inflation rate. c. people have perfect foresight and always predict future price levels correctly. d. people use all current information available to formulate their inflation expectations. e. people react spontaneously to price level changes and do not consider any past or present information.