SG2microF11

SG2microF11 - PRINCIPLES OF MACROECONOMICS Study Guide Two...

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PRINCIPLES OF MACROECONOMICS Study Guide Two (for Chapter Six) August 29, 2011 Illustrations: No Illustrations for Chapter One Math: No Math for Chapter One Behavioral Economics (from the power points from Alan Krueger) 1. List and define the elements of rational decision making. What is “instrumental rationality”? 2. What is “Behavioral Economics”? Define “bounded rationality” and explain how the cost of thinking can lead to sub-optimal decisions. 3. Describe the following ideas from Behavioral Economics a. Framing b. Letting Sunk Costs Matter c. Faulty Discounting d. Overconfidence e. Status quo bias f. Fairness 4. The Pension Protection Act of 2006 encourages companies to automatically enroll employees in 401(k) plans. Why was it considered necessary to automatically enroll employees in a retirement plan? 5. Is more choice always better? How do investors react when given more choices to allocate their portfolio?
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SG2microF11 - PRINCIPLES OF MACROECONOMICS Study Guide Two...

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