Distinguish between two kinds of asymmetric information
What will be an ideal response?
One type of information asymmetry occurs when one party in a transaction observes some characteristics of the good or service that the other does not. In this case, the good is said to have hidden characteristics. Another kind of information asymmetry occurs when one party in a transaction takes actions that are relevant to but not observed by the other party. Such actions are called hidden actions.
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The economic way of thinking suggests competition and cooperation are
A) incompatible. B) mutually destructive. C) present in any society. D) only present in a capitalist market economy.
If the banking sector borrows internationally and lends locally, how does this intensify a financial crisis?
What will be an ideal response?
Which type of borrowers were least likely to default in their mortgage at the beginning of the financial crisis?
A) those with fixed-rate mortgages who made large down payments B) those with alt-A loans C) subprime borrowers D) those with adjustable-rate mortgages
The term laissez faire can be translated
a. "leave it alone" b. "make it equitable (fair)" c. "take an active role" d. "markets work" e. "free of problems"