Moral hazard can do harm to one party to a contract, but always results in efficient behavior.
Answer the following statement true (T) or false (F)
False
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Ignoring any supply-side effects, to close an inflationary gap of $100 billion with a government expenditure multiplier of 5, the government could
A) decrease government expenditure on goods and services by $20 billion. B) decrease government expenditure on goods and services by $100 billion. C) lower taxes by $100 billion. D) increase government expenditure on goods and services by $20 billion. E) lower taxes by more than $20 billion.
Why do most economists believe that it is important for a country's central bank to be independent of the rest of the country's central government?
What will be an ideal response?
If managers do not choose to maximize profit, but pursue some other goal such as revenue maximization or growth,
A) they are more likely to become takeover targets of profit-maximizing firms. B) they are less likely to be replaced by stockholders. C) they are less likely to be replaced by the board of directors. D) they are more likely to have higher profit than if they had pursued that policy explicitly. E) their companies are more likely to survive in the long run.
Marginal propensity to save is equal to the change in ____ divided by the change in ____
a. consumption spending; total income b. saving; total income c. saving; disposable income d. consumption spending; disposable income