Banks deal with problems of adverse selection by
A) charging high interest rates.
B) gathering information about the default risk of borrowers.
C) making only short-term loans.
D) making only long-term loans.
B
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The risk-shifting problem tends to be __________ for __________ firms than for __________ firms
A) greater; small; large B) greater; large; small C) the same; large; small D) None of the above.
Suppose that Google announces that its profits for the third quarter of 2013 were $1.6 billion. As a result of this announcement the price of Google's stock declines. The best explanation of this is
A) market participants expected Google's profits to be greater than $1.6 billion for the third quarter. B) market participants expected Google's profits to be less than $1.6 billion for the third quarter. C) the stock market is not an efficient market. D) market participants have adaptive expectations.
Pollution is a
a. problem that is entirely unrelated to the parable called the Tragedy of the Commons. b. problem that cannot be remedied with regulations or corrective taxes. c. negative externality that can be viewed as a public-goods problem. d. negative externality that can be viewed as a common-resource problem.
Monetarists believe that an increase in the money supply will raise both Real GDP and the price level in the short run, and will only raise Real GDP in the long run
Indicate whether the statement is true or false