Consider the following three statements: i. You can either ...

[OSWALD]

Consider the following three statements:
 
  i. You can either stand during a college football game or you can sit. You believe that you will see the game very well if you stand and others sit but that you will not be able to see at all if you sit and others stand. You therefore decide to stand.
  ii. Your friend tells you that he expects many people to stand at football games.
  iii. An economist studies photos of many college football games and estimates that 75 percent of all fans stand and 25 percent sit.
  Which of these statements deals with optimization, which deals with equilibrium, and which deals with empiricism? Explain.

Question 2

Most of the pressure for a monetary growth rule has disappeared because since 1980,
 
  A) the relationship between movements in the money supply and movements in real GDP and the price level have become much weaker.
  B) the relationship between movements in the money supply and movements in real GDP and the price level have become much stronger.
  C) the relationship between movements in interest rates and movements in real GDP and the price level have become much weaker.
  D) the relationship between movements in interest rates and movements in real GDP and the price level have become much stronger.

[isabelt_18]

Answer to Question 1

The first statement involves optimization. You believe that you will be best off if you stand regardless of the decisions other people make. The second statement involves equilibrium. If many other people also reason as you did then we should expect many people will decide to stand. The third statement involves empiricism. Our theory tells us that we should expect many people to stand at games. This economist's empirical study supports the theory.

Answer to Question 2

A

[OSWALD]

Excellent

[JaynaD87]

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