Free market economies have led to
a. high growth rates but low efficiency.
b. high efficiency and low growth rates.
c. high growth rates and high efficiency.
d. low growth rates and low efficiency.
c
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Which is the best example of idiosyncratic risk?
A) a financial crisis B) a lawsuit because the corporation produced a faulty product C) a recession D) rising interest rates
Suppose that there is concern about the stability of the global financial system causing a flight to the safety of U.S. government bonds. Which of the following is NOT a likely consequence?
A) higher price of U.S. government bonds B) lower interest rate on U.S. government bonds C) increased demand for U.S. government bonds D) reduced supply of U.S. government bonds
Which of the following would not be considered a negative externality?
a. Smelter, Inc. creates steel and pollution. b. Your friend buys a new puppy that barks every night. c. You have an adverse reaction to a medication your doctor prescribed for you. d. Your neighbor plays loud music that you dislike through stereo speakers set up on his deck.
If insurance companies knew how risk-averse their customers were:
A. diversification would not occur. B. risk pooling would not occur. C. policies would be perfectly diversified, resulting in lower premiums for everyone. D. adverse selection would not occur.