The convergence theory predicts that:
A. countries that start out poor should initially grow faster than ones that start out rich, but will eventually slow to the same growth rate.
B. poor countries are not generally expected to sustain a high growth rate and surpass the existing rich countries.
C. even if countries differ in their rates of savings, population growth, and other features, they will still converge to the same growth rate, although not the same level of income.
D. All of these are predicted by the convergence theory.
Answer: D
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Over long periods of time, the growth rates of actual and potential GDP have been
a. diverging. b. similar. c. declining together. d. usually far apart.
Credence goods are particularly susceptible to the lemons problem because
A) they have qualities that are difficult for producers to fully assess. B) they have qualities that are difficult for consumers to fully assess. C) creative responses among producers create volatility in market supply. D) creative responses among consumers create volatility in market demand.
Which of the following best describes a situation of moral hazard?
a. Sicker people are more likely to buy health insurance. b. Prospective used-car buyers have less information about a particular car than its seller does. c. Drivers with collision insurance drive more recklessly. d. Drivers with collision insurance wear seatbelts less often.
Purchasing power parity (PPP) is a well-known theory that seeks to define relationships between currencies.
a. true b. false