a. John Maynard Keynes famously described financial market behavior as a beauty contest. People tend to try and pick out investments that everyone else also thinks are winners. What are some reasons that people tend to follow the crowd and go with the herd? How does this behavior influence financial markets? Be sure to include both social aspects as well as financial motivations.

b. Keynes also argued that because the future is uncertain (we cant know anything for sure), people tend to use heuristics (rules of thumb) to help them make decisions. Explain three of the five heuristics we use for decision-making. Explain how the heuristics can lead to volatile financial markets.