Signaling is when someone takes action to:
A. reveal one's own private information.
B. find out the opportunity cost of acquiring more information.
C. reveal private information about someone else.
D. None of these statements is true.
Answer: A
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If a significant portion of firms in the economy does not adjust product prices, a predicted result according to new Keynesian theory is
A) real inflation cycles. B) inflation dynamics. C) real business cycles. D) output dynamics.
Given the following Taylor rule:Target federal funds rate = natural rate of interest + current inflation + 1/2(inflation gap) + 1/2(output gap);Explain what happens to the real interest rate and why it happens, each time inflation increases by 1 percent.
What will be an ideal response?
The theory of rational expectations concludes that
A. since expectations can cause discretionary stabilization policies to be pro-cyclical, it is better to rely upon policy rules. B. discretionary monetary policy is a more powerful stabilization device than is discretionary fiscal policy. C. discretionary fiscal policy is a more powerful stabilization device than is discretionary monetary policy. D. discretionary policies are more effective than rules in stabilizing the economy.
If Gerry saves $500 per month, then Gerry's ________ will increase by ________.
A. income; $500 only if he buys additional assets B. wealth; $500 only if he has no debt C. wealth; $500 only if he buys additional assets D. wealth; $500