Which of the following may be explained by adverse selection?
a. When banks raise the interest rate on loans, high-risk applicants leave the market.
b. When health insurance companies decrease insurance charges but increase deductibles, less healthy people are more willing to purchase insurance.
c. As the cost of insurance rises, low-risk applicants reduce their coverage.
d. Products are sold at prices that reflect their true value.
e. Loan companies do not require down payments.
c
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In the forex, the demand for dollars will decrease if:
A. foreigners wish to buy U.S. goods. B. foreigners wish to buy U.S. financial assets. C. interest rates are lower in the U.S. relative to interest rates abroad. D. interest rates are higher in the U.S. relative to interest rates abroad.
Real GDP is better than nominal GDP for measuring growth because real GDP has been adjusted for changes in
A. Productivity. B. The price level. C. Unemployment. D. The business cycle.
A bundle:
A. is when a store sells goods at a discounted price. B. describes the amount of people that choose a particular combination of goods. C. is a curve describing different combinations of goods and services an individual could choose to consume. D. is a specific combination of goods and services an individual could consume.
Answer the following statements true (T) or false (F)
1. The aggregate demand curve shows that when the price level rises, the quantity of real output demanded decreases. 2. An increase in the price level reduces the real value of financial assets with fixed money values and, as a result, the holders of these assets decrease their spending. 3. The real-balance and interest-rate effects help explain why aggregate demand might shift to the right or to the left. 4. An increase in real interest rates will increase investment and aggregate demand. 5. When the stock market crashed in 2008, the so-called reverse wealth effect caused consumer spending to decrease.