When housing prices decrease, household wealth ________ and consumption ________.
A. increases; decreases
B. increases; increases
C. decreases; increases
D. decreases; decreases
Answer: D
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If a country experienced deflation, then
a. the nominal interest rate would be greater than the real interest rate. b. the real interest rate would be greater than the nominal interest rate. c. the real interest rate would equal the nominal interest rate. d. nominal GDP would be smaller than the money supply.
The most important reason for why some people have higher income than others is ______.
Fill in the blank(s) with the appropriate word(s).
Health insurance companies face an asymmetric information problem because:
A. insurance companies have superior information concerning the risk of illness or injury of those insured. B. buyers have superior information concerning their risk of illness or injury. C. the insurance companies and buyers both have equal information concerning the risk of illness or injury of those insured. D. the probability of becoming ill or injured is unrelated to the insured person's occupation.
One reason that lawyers might prefer a contingent contract when representing a plaintiff in a tort case is that
A) lawyers are risk neutral. B) diversification of many cases allows lawyers to reduce risk. C) lawyers are typically confident about winning every case. D) hourly rates for lawyers are usually very low.