When the government institutes a target price,
A) a surplus is created.
B) consumers must pay the target price.
C) the farmer receives a deficiency payment if the market price is below the target price.
D) the farmer receives a deficiency payment if the market price is above the target price.
E) all of the above
C
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Starting from long-run equilibrium, a war that raises government purchases results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; potential C. higher; higher D. lower; higher
A contractionary monetary policy causes
A) higher interest rates, which increases the foreign demand for U.S. financial instruments, which causes interest rates to decrease. There is no effect on net exports. B) higher interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports. C) higher interest rates, which increases the international price of the dollar and decreases net exports. D) lower interest rates, which decreases the foreign demand for U.S. financial instruments, raising the international price of the dollar and increasing net exports.
Lenders generally want borrowers to agree to invest prudently, yet once a loan is made borrowers may use the funds in a highly risky fashion. This leads to the problem of
A) deposit insurance. B) investor selection. C) critical mass. D) moral hazard.
Pooling of risk occurs when depository institutions
A) make assets more liquid. B) specialize in loaning only to good borrowers. C) bring lenders together. D) lend to a variety of different borrowers.