The significant difference between adverse selection problems and moral hazard problems is
a. that adverse selection refers to bad luck, moral hazard refers to bad behaviors.
b. that adverse selection applies to markets for goods, moral hazard applies to markets for services.
c. only identifiable after an action has been taken.
d. that in adverse selection one group of people starts out at a higher risk, while in moral hazard problems, people incur additional risks.
d. that in adverse selection one group of people starts out at a higher risk, while in moral hazard problems, people incur additional risks.
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If the FOMC decides to engage in the selling of government bonds, what is the effect on the money supply?
A) a decrease B) an increase C) an initial increase followed by an additional rise when the bonds mature D) no change
How can the difference between the current unemployment rate and the natural rate of unemployment help explain changes in inflation?
What will be an ideal response?
A price taking firm’s short-run supply curve is perfectly elastic at the market price.
Answer the following statement true (T) or false (F)
Assume the required reserve ratio (RRR) is 10 percent. If the Fed purchases a $5,000 bond from a bond dealer who then deposits the $5,000 in a HSBC Bank account, what has happened to the money supply?
a. It has decreased by $5,000. b. It has increased by $5,000. c. It has decreased by $4,500. d. It has increased by $4,500. e. There has been no change in the money supply.