Adverse selection tends to cause which of the following?
a. Placing a strain on the insurance system
b. Requiring participation in insurance exchanges
c. Mandating the payment of insurance premiums
d. Increasing the size of insurance risk groups
a. Placing a strain on the insurance system
Adverse selection strains the insurance system.
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As a part of the tax cut package signed into law on December 17, 2010, the government reduced the employee portion of the payroll tax from 4% to 2% for 2011. According to the permanent-income hypothesis, households that smooth consumption will
A) use all of the extra income generated by this tax reduction for consumption during 2011. B) use a large portion of the extra income generated by this tax reduction for consumption during 2011. C) use most of the extra income generated by this tax reduction as saving during 2011. D) split the income evenly between consumption and saving during 2011, since the tax cut will expire after one year and consumption is smoothed.
According to the real business cycle theory, which of the following would be a real disturbance to the economy?
A) change in the required reserve ratio B) reduction in the money supply C) increase in the rate at which married women participate in the labor force D) increase in the price level
The best example of a capital good would be ___.
A. the generator in a power plant that makes electricity B. a new lawn mower owned by Mr. Goffe C. aluminum that is transformed into an airplane D. funds that a company borrows from a bank
Refer to Figure 16.2. For the given Phillips curve, a decrease in aggregate demand, ceteris paribus, could cause a
A. Rightward shift in the curve. B. Movement from point A to point B. C. Movement from point B to point A. D. Leftward shift in the curve.