A likely consequence of debt default is:
a. a decrease in the federal cost of borrowing
b. an increase in unemployment due to growing uncertainty.
c. a sudden decline in the market interest rates.
d. an increase in the credit flows in an economy.
e. a sudden increase in the investment flows in the economy.
b
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The problem created by asymmetric information before the transaction occurs is called ________, while the problem created after the transaction occurs is called ________
A) adverse selection; moral hazard B) moral hazard; adverse selection C) costly state verification; free-riding D) free-riding; costly state verification
Unemployment and inflation are important determinants of short-run material welfare, whereas productivity growth is an important determinant of long-run material well-being
a. True b. False Indicate whether the statement is true or false
Explain the concept of efficiency as it relates to taxation
When economists say that people choose rationally, this means
a. they gather all relevant information before making their purchases b. once a pattern of behavior has been established, people tend to become set in their ways c. people respond in predictable ways to changes in costs and benefits d. people rarely make errors when they are permitted to make transactions e. once made, decisions are never reversed