Assume that a firm pays its workers above the market-clearing wage in a competitive industry. Explain how this might be a strategy to mitigate the problem of moral hazard?
What will be an ideal response?
Supervising employees is costly but often necessary to insure that workers are doing their jobs. Paying workers a wage that is higher than the market-clearing wage may actually result in workers being more productive and less inclined to loaf around if the cost of losing one's job means a significant salary reduction.
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If inflation falls,
a. people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. b. people choose to put in more effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders. c. people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from lenders to borrowers. d. people choose to put in less effort to keep money balances low. When inflation is unexpectedly low it redistributes wealth from borrowers to lenders.
In the United States, an example of a common in-kind transfer would be:
A. public housing. B. Aid to Families with Dependent Children. C. earned income tax credit. D. All of these are in-kind transfers.
When interest rates decrease, banks will normally
A. increase lending, but decrease deposits and the money supply. B. increase lending, deposits, and the money supply. C. decrease lending, but increase deposits and the money supply. D. decrease lending, deposits, and the money supply.
If a country is currently producing inside its production possibilities curve
A. it can increase the production of both goods by putting unemployed resources to work. B. it is experiencing efficient production of one good but not the other. C. it can increase the production of one of the goods only if it reduces the production of the other good. D. None of these are correct.