Solutions to the moral hazard problem include
A) low net worth.
B) monitoring and enforcement of restrictive covenants.
C) greater reliance on equity contracts and less on debt contracts.
D) greater reliance on debt contracts than financial intermediaries.
B
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A cost-saving innovation in a perfectly competitive industry will lead to:
A. economic profits for a few firms for a short time. B. economic profits for new firms. C. entry by new firms. D. a leftward shift of the industry supply curve.
Multiplier effects occur when there is a change in spending which does not depend on income. Spending which does not depend on income is referred to as
A) coincident spending. B) nominal spending. C) autonomous expenditures. D) induced expenditures.
Marginal utility is always a positive number
Indicate whether the statement is true or false
At any given price level, which of the following fiscal policies will decrease real GDP demanded, other things constant?
a. Increase in fiscal spending on infrastructure b. Increase in net taxes c. Increase in transfer payments d. Increase in money supply