In the market for loanable dollars, an increase in the profitability of investments overall will be revealed in
A. a decrease in the demand for loanable dollars.
B. an increase in the supply of loanable dollars.
C. an increase in the demand for loanable dollars.
D. a decrease in the supply of loanable dollars.
Answer: C
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Assume that a fixed exchange rate is overvalued. Describe the situation of a speculative crisis against this currency. What can the central bank do to defend the currency? Why might the alternative of devaluation be preferable?
What will be an ideal response?
In the text, the authors present evidence that the market for free agents in professional baseball is subject to the lemons problem. How could a prospective free agent overcome this problem when seeking a new contract?
A) Agree to accept a lower salary with a new team. B) Rely on standardization to avoid the asymmetric information problem. C) Decide to negotiate only with their current team. D) Develop a reputation as a reliable and productive player.
Cooperation:
A. is sustained by the threat of punishment for bad behavior. B. is sustained by the promise of reward for good behavior. C. will fail to be established if threats/promises are not credible. D. All of these are true about cooperation.
An absence of property rights often leads to market failure. When this is the case, how does society usually solve the problem?