The process by which financial institutions accept savings from businesses, households and governments and lend the savings to other businesses, households and governments is
A. adverse selection.
B. moral hazard.
C. asymmetric information.
D. financial intermediation.
Answer: D
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The Fed affects aggregate demand through monetary policy by changing
A) tax rates on only interest income and so influencing disposable income. B) government expenditure and so influencing the budget balance. C) the quantity of reserves and determining government expenditure. D) tax rates and influencing disposable income. E) the federal funds rate and the quantity of reserves.
Suppose the price of an item in a perfectly competitive market is $3. For a firm in this market, MC = MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that
A) the firm should shut down because TC > TR. B) the firm should continue to produce because P>AVC. C) the firm should shut down because its TFC is $320 and its TC is $400. D) the firm should shut down because other firms will enter the industry as the market is perfectly competitive.
The supply-side effects of a reduction in taxes are the result of
a. increases in the disposable income of households accompanying reductions in tax rates. b. the stimulus effects of increases in government expenditures. c. increased attractiveness of productive activity relative to leisure and tax avoidance. d. reductions in interest rates that generally accompany expansionary fiscal policy.
If the price of airline tickets falls, what will happen to the demand curve for flight attendants?
a. It will shift to the right. b. It will shift to the left. c. The direction of the shift is ambiguous. d. It will remain unchanged.