Which of the following happens if the real interest rate of an economy rises?
A) Labor demand increases. B) Labor supply falls.
C) Investment falls. D) Consumption increases.
C
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A key aspect of the principal-agent problem is that
A) the principal cannot perfectly monitor the agent's actions. B) the principal can perfectly monitor the agent's actions. C) the output level does not depend on the agent's actions. D) the principal is always risk-averse.
Profitable investment is most effectively promoted when:
a. the money supply and price level are stable. b. inflation is rising rapidly c. monetary policy is unanticipated. d. persistent inflation increases uncertainty.
The following diagram presents a circular-flow model of a simple economy. The outer set of arrows (shown in green) shows the flow of dollars, and the inner set of arrows (shown in red) shows the corresponding flow of inputs and outputs. Which of the following is true regarding this economic model?
a) Because it does not take into account the role of government, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy. b) Because it does not take into account international trade, the circular-flow diagram is useless for the purposes of modeling how dollars and resources move throughout an economy. c) While simple, the circular-flow diagram can still be useful for the purposes of modeling how dollars and resources move throughout an economy. d) Because, in reality, the economy is very large, the simplicity of the circular-flow diagram makes it useless for the purposes of modeling how dollars and resources move throughout an economy.
Why do banks package loans into securities?
A. To take advantage of tax breaks passed by the federal government as part of stimulus packages. B. The banking regulations require them to do so. C. To spread the risk of default and increase liquidity. D. To get around adhering to current banking regulations.