Which of the following is true about a risk-averse individual facing a full menu of actuarily fair insurance contracts to choose from?
A. The individual will "over-insure" if consumption is more meaningful in the good state.
B. The individual will "over-insure" if consumption is more meaningful in the bad state.
C. The individual will fully insure when tastes are state-independent.
D. (a) and (b) are true.
E. (a) and (c) are true.
F. (b) and (c) are true.
G. All of the above.
H. None of the above.
Answer: F
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Select the phrase that correctly completes the following statement. "A decrease in the expected future price caused an increase in the supply of smartphones. As a result
A) the equilibrium quantity of smartphones decreased." B) the price of smartphones decreased and the quantity of smartphones demanded increased." C) the price of smartphones decreased and the demand for smartphones increased." D) the price of smartphones decreased. The lower price caused the supply of smartphones to decrease."
Refer to the graph below, which shows an aggregate demand. If the economy is at point C and the price level increases by 100, then the wealth, interest-rate, and foreign purchases effects will:
A. Move the economy to point A
B. Move the economy to point B
C. Move the economy to point D
D. Shift the AD curve to the left