Suppose Nara could invest her $1000 in a savings account or she could invest in the stock market
After one year, the savings account has a guaranteed 5 percent interest rate and the stock market has a 10 percent chance of tripling her money, and 90 percent chance of losing it all. What is the difference in Nara's expected wealth between these two options? A) $1050
B) $300
C) $750
D) $50
C
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Which of the following describes a moral hazard problem?
A) a process by which individuals have substantial resources devoted to the exchange process and need to make a profit or they will be adversely affected B) a process by which individual buyers or sellers with better information are more likely to participate in voluntary exchange C) a contractual problem that results because monopolies exist in all economies D) a post-contractual problem that may result because participants to the exchange process have information that allows them to act in an opportunistic manner
Refer to Scenario 1-2. Had the firm not produced and sold the last 300 hats, would its profit be higher or lower, and by how much?
A) Its profit will be $1,000 lower. B) Its profit will be $100 lower. C) Its profit will be $1,100 higher. D) Its profit will be $100 higher.
Other things equal, in an open economy, monetary policy to offset a contractionary gap will tend to
a. Lower the exchange value of the dollar and lower net exports. b. Lower the exchange value of the dollar and raise net exports. c. Raise the exchange value of the dollar and lower net exports. d. Raise the exchange value of the dollar and raise net exports.
Identify at least two problems a borrower would face if banks were not required to disclose the information that they are currently required to make available.
What will be an ideal response?