Category: Economics

➤ Why might a dominant strategy not exist for Newsweek even in a 2×2 game?
Because each action’s payoff often depends on the opponent’s choice, no single action may outperform alternatives against every possible rival move. Strategic tradeoffs or conflicting incentives can prevent dominance. When best responses change with the opponent’s move, pure dominant strategies may not exist and other solution concepts apply.

Question 15What does a production possibilities frontier represent?

➤ How do statisticians choose items and weights for the basket?
Agencies select items using household expenditure surveys, retail scanner data, and national accounts. They group goods into categories and assign weights that reflect each category’s share of typical spending. Weights ensure the index mirrors actual consumer importance across items. High-frequency transactions and market coverage guide inclusion and sampling to keep the basket representative.

➤ Why does a positive inflation surprise help borrowers but hurt lenders?
A positive surprise reduces the purchasing power of future nominal payments. Borrowers repay debt with money worth less in real terms, so their real burden falls. Lenders receive lower real returns. The effect is strongest for long-term, fixed-rate loans and bonds until interest rates reprice.