Explain the concept of adverse selection. Give an example
What will be an ideal response?
Adverse selection is a tendency for people to enter into agreements in which they can use their private information to their own advantage and to the disadvantage of the less informed party. For example, if a car dealership offers its salespeople a fixed wage, it will attract lazy salespeople. Hardworking salespeople will prefer not to work for this dealership because they can earn more by working a dealership that pays by results.
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The Board of Governors of the Federal Reserve is part of a larger policy-making group called the
A) Senate Banking Committee. B) Federal Deposit Insurance Corporation. C) American Banking Association. D) Federal Open Market Committee.
The system we use to measure the value of an economy is called:
A. national income accounting. B. national expenditure accounting. C. macroeconomic summation. D. national economic valuation.
Suppose the supply and demand tables shown reflect the supply and demand for milk per week. At a price of $4, there is a:Price(per gallon)Quantity demanded (gallons per week)Quantity Supplied (gallons per week)$12,0001,000$21,5001,500$31,0002,000$45002,500
A. shortage of 1,000 gallons per week. B. shortage of 2,000 gallons per week. C. surplus of 1,000 gallons per week. D. surplus of 2,000 gallons per week.
Which of the following reduced the demand stimulus effects of monetary policy during the years following the 2008-2009 recession?
a. Failure of the Fed to provide sufficient reserves to the banking system for the extension of new loans. b. A substantial reduction in the velocity of money resulting from the historically low interest rates. c. The Fed's high interest rate policy that reduced private investment. d. Inability of the Fed to gain approval from Congress to purchase assets other than bonds issued by the federal government.