Explain why checks on principals might be necessary
What will be an ideal response?
Without checks, the employer (principal) might have the ability of exploiting an employee (agent) by claiming that he/she did not put forth the effort agreed upon, or by falsely reporting information such as profits. Since payments are made after work is completed it potentially puts the employee in a bad bargaining position. An inefficient contract might eliminate/mitigate such behavior.
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Economists often treat the economy's capital stock as fixed because
A) labor is a more important factor of production than capital, so economists ignore capital. B) it takes a long time for new investment and the scrapping of old capital to affect the overall quantity of capital. C) there is very little capital in the economy compared with the amount of labor. D) unless the interest rate changes, the capital stock doesn't change.
The peak phase of the business cycle represents
A) a temporary maximum output level of Gross Domestic Product (GDP).
B) an increase in foreign investment.
C) a labor surplus.
D) falling prices.
The U.S. and other industrializing nations depended heavily on international trade
Indicate whether the statement is true or false
Social Security payments depend on an individual's wages, but the benefits formula is progressive.
Answer the following statement true (T) or false (F)