Moral hazard:
A. always happens when adverse selection is a problem.
B. never happens when adverse selection is a problem.
C. can happen when adverse selection is a problem.
D. None of these statements is true.
C. can happen when adverse selection is a problem.
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If nominal GDP increases this year, then real GDP
A) could either increase or not change but cannot decrease. B) must decrease. C) must increase. D) must not change. E) could increase, decrease, or not change.
Which of the following accounts for the largest portion of federal government spending?
A) Education B) Policing C) Infrastructure D) National defense
The principal-agent problem is a problem
A) of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. B) that exists when a person (principal) has more information about the task than the agent he hires to perform the task. C) caused by agents pursuing their own interests rather than the interests of the principals who hired them. D) caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way.
Under the adaptive expectations hypothesis, which of the following is the most likely short-run effect of a move to a more expansionary monetary policy?
a. higher prices and no change in real output b. higher prices and expansion in real output c. no change in prices but an expansion in real output d. no change in either prices or real output