Principal-agent problems arise due to hidden product characteristics
Indicate whether the statement is true or false
false
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Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C B. B; C C. B; A D. D; B
Saving remaining constant, the average propensity to save declines with an increase in disposable income
a. True b. False Indicate whether the statement is true or false
The notion of reciprocity means that one nation will impose import restrictions on another in order to:
a. stimulate an increase in trade restrictions in the latter. b. stimulate a decrease in trade restrictions in the latter. c. eliminate trade restrictions immediately in both countries. d. improve the government revenue collections through tariffs in both countries. e. enforce standards of product quality in the latter.
The real interest rate tells you
a. how fast the number of dollars in your bank account rises over time. b. how fast the purchasing power of your bank account rises over time. c. the number of dollars in your bank account today. d. the purchasing power of your bank account today.