The state of Massachusetts requires all citizens to purchase medical insurance or face a monetary penalty when filing their taxes. The penalty is significantly less than the average annual insurance premium. Moreover, the state requires insurance companies to issue policies to anyone who applies, regardless of their health at the time of application. Which of the following examples describes the
inherent adverse selection problem?
a. Tricia purchases an insurance policy through her employer and visits her doctor for annual check-ups.
b. Sue purchases insurance only after learning that she has cancer.
c. Mike pays the penalty rather than purchasing insurance because it is cheaper for him than paying insurance premiums and he is generally in good health.
d. Both b and c are correct.
d
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Which of the following is a valid statement?
a. Required reserve ratio = required reserves as a percentage to total deposits. b. Required reserves = the maximum reserves required by the Fed. c. Excess reserves = total reserves plus required reserves. d. All of these.
A price floor policy establishes a minimum price for a market. Which of the following results from a binding price floor?
A. Shortage B. Excess demand C. Excess supply D. Equilibrium
If a bank has $200 million in deposits, the required reserve rate is 10 percent and the bank has $23 million in reserves:
A. the bank is short of required reserves. B. the bank has excess reserves of $21 million. C. the bank has excess reserves of $3 million. D. the bank has excess reserves of $13 million.
The process of "demonetization of gold" involves
A. a sudden fall in private demand for gold in a country due to discovery of a minable gold deposit. B. gold sales into the private market in recent decades by central banks and the International Monetary Fund (IMF). C. a sudden increase in the private demand for gold in a country, forcing its central bank to sell off gold. D. the purchase of gold and supply of money into the market by the central banks to defend the fixed gold prices.