Refer to the scenario above. Which of the following statements is true of the terms of trade of tea for coffee?
A) The terms of trade will lie somewhere below 1/3.
B) The terms of trade will lie somewhere above 2.
C) The terms of trade will lie between 1/3 and 2.
D) The terms of trade will equal zero.
C
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Bank X had a reputation for asking few questions when it provided loans. Five years later, the majority of the loans were not repaid. This is because the bank had failed to address the
A) moral hazard problem. B) free-rider problem. C) contrary selection problem. D) adverse selection problem.
Which of the following is an example of moral hazard?
A) I hire you to work in my garden for a fixed fee, and you work hard all day. B) I hire you to work at an hourly rate and you work as slowly as possible. C) You apply for the job only because I pay a fixed wage per day, no matter how much or little you do. D) You agree to be paid by the weed to work in my garden, and then don't work hard.
Which of the following is true in the classical model?
a. A spontaneous increase in spending can cause an increase in output and employment. b. An increase in output and employment can cause a decrease in spending. c. A spontaneous decrease in spending can cause an increase in output and employment. d. An increase in output and employment can cause an increase in spending. e. A spontaneous decrease in spending can cause a decrease in output and an increase in employment.
A flat-rate tax on residential real estate is a
a. progressive real estate tax b. regressive real estate tax c. progressive income tax d. regressive income tax e. proportional real estate tax