The rationality assumption states that
A) all actions taken by consumers are based on what is good for society.
B) people make decisions regardless of how the outcome will affect them.
C) people make decisions to buy only those goods that they need rather than goods that they want.
D) people do not intentionally make decisions that would leave them worse off.
D
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If a one-year bond currently yields 5% and is expected to yield 7% next year, the liquidity premium theory predicts that the yield today on a two-year bond should be
A) 5%. B) less than 6%, but more than 5%. C) 6%. D) more than 6%.
Monetary policy designed to offset an inflationary gap would:
a. Increase interest rates and increase aggregate demand. b. Increase interest rates and decrease aggregate demand. c. Decrease interest rates and increase aggregate demand d. Decrease interest rates and decrease aggregate demand.