What do American drivers on congested roads and Soviet shoppers waiting in line to purchase clothing have in common?
a. Both the American drivers and the Soviet shoppers are consuming products at prices that do not represent the full costs of the products.
b. Both the American drivers and the Soviet shoppers can purchase as much as they want at the market price.
c. Both the American drivers and the Soviet shoppers could avoid waiting if the prices were lowered.
d. American drivers and Soviet shoppers have nothing in common.
a
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An upward-sloping LM curve implies that the expenditure multiplier, when compared with the simple Keynesian expenditure multiplier, is
A) smaller. B) larger. C) equal. D) equal to the inverse of the simple multiplier.
Each of the following is an example of moral hazard in which people modify their behavior in an opportunistic way, often frustrating the intent of governmental or management policies. Which is NOT an example of moral hazard?
a. After a firm gets a loan from a bank to purchase inventory, the borrower instead decides to use it to invest in call options on stocks. b. Based on motorcycle accident data, a state passes a law requiring motorcyclists to wear helmet, but then the motorcyclist wearing helmets start to drive faster and more recklessly. c. Bank and nonbank mortgage lenders make money granting loans. But the Government through Freddie Mac and Fannie Mae decides to purchase these loans. The mortgage lenders find that they earn a fee for each mortgage that they grant and then sell to Freddie Mac or Fannie Mae. Since they never intended on holding on to the mortgage, the mortgage granters are not too particular on whether the customer can really pay it back. The lowest quality loans are sold to the Government. d. A fellow buys a $1 million life insurance policy and then travels to Nepal to climb Mount Everest. e. A student learns that if he or she reads the chapter and studies lecture notes, the student does better on the next test.
During the Cold War era, the U.S.:
A. gave foreign aid to promote their communistic support. B. gave foreign aid, while the Russians demanded reparations from many of the same countries. C. gave foreign aid to prevent the spread of communism, while Russia did the same in an effort to align countries with the Communist bloc. D. did not engage in any foreign aid because of the severe cost of fighting the war.
In economics, what term refers to using fewer resources than a competitor?
a. absolute advantage b. comparative advantage c. market efficiency d. negative incentive