The federal funds rate is the interest rate that ________ charge(s) ________.
A. banks; their best corporate customers
B. the Fed; commercial banks
C. banks; on federal student loans
D. banks; other banks
Answer: D
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If the agent has more information than the principal and there is only one state of nature, then
A) efficiency in both production and risk-bearing can be achieved. B) only efficiency in production can be achieved. C) only efficiency in risk-bearing can be achieved. D) neither efficiency in production nor efficiency in risk-bearing can be achieved.
Suppose you hedge with a put option. What are the consequences of selecting a put option with a lower strike price?
A. Higher premium, lower price floor. B. Higher premium, higher price floor. C. Lower premium, lower price floor. D. Lower premium, higher price floor.
Refer to Figure 1.7. If this economy is currently producing at point F, then by employing more resources this economy
A. Can move to points D, G, or J. B. Can move to point D, but not points G or J. C. Can move to point G, but not points D or J. D. Will remain at point F.
A price floor causes excess demand, resulting in the need to ration by some means other than price.
Answer the following statement true (T) or false (F)