Monetary policy is set by the
A. Regional Federal Reserve banks.
B. Federal Advisory Council.
C. Federal Open Market Committee.
D. Board of Governors.
Answer: D
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A) creates moral hazard but eliminates adverse selection. B) creates adverse selection but eliminates moral hazard. C) creates both moral hazard and adverse selection. D) eliminates both moral hazard and adverse selection.
Although debt contracts require less monitoring than equity contracts, debt contracts are still subject to ________ since borrowers have an incentive to take on more risk than the lender would like
A) moral hazard B) agency theory C) diversification D) the "lemons" problem
Explain why to some game theorists, the idea of mixed strategies is appealing, and to others it is implausible
What will be an ideal response?
If you were a government official and wanted to raise the price of wheat, which of the following actions would you take?
a. Take wheat from government storage and sell it. b. Encourage farmers to use more fertilizer. c. Lower the price of rye. d. Subsidize purchases of farm equipment. e. Encourage farmers to grow less wheat.