Which of the following is not true about moral hazard?
A. It increases the difficulty of operating private insurance markets.
B. It increases the difficulty of operating public insurance markets.
C. It is the tendency of people to change behavior when insured.
D. It is the tendency of people with higher risks to buy more insurance.
Answer: D
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Refer to the above figure. Suppose the economy is in long-run equilibrium at point A, and the government initiates an expansionary monetary policy to increase aggregate demand
Which of the following is a TRUE statement concerning the differences between what happens when the central bank action is unanticipated and when it is anticipated? A) The new long-run equilibrium will be point C in either case. When the increase in aggregate demand is unanticipated, the economy moves to B in the short run, but when the increase in aggregate demand is anticipated, short-run aggregate supply shifts when the aggregate demand curve shifts, and the economy moves immediately to point C. B) The new long-run equilibrium when the increase in aggregate demand is unanticipated is point B while the new long-run equilibrium when the increase in aggregate demand is anticipated is point C. C) The new long-run equilibrium is point C in either case. When the increase in aggregate demand is unanticipated, the new short-run equilibrium is point B, but when the increase in aggregate demand is anticipated the new short-run equilibrium is point D. D) The new long-run equilibrium when the increase in aggregate demand is unanticipated is point B while the new long-run equilibrium when the increase in aggregate demand is anticipated is point A.
Explain how the interest rate effect can increase aggregate demand
What will be an ideal response?
Switching to a faster economic growth path comes at the cost of lower
A) present investment. B) present consumption. C) future investment. D) present saving. E) future saving.
According to the theory of _____, people look at past experiences and gradually adapt their beliefs and behavior as circumstances change
a. adaptive expectations b. rational expectations c. sticky wages d. absolute advantage