The absorption approach is a theory of the balance of payments that emphasizes how domestic spending on domestic goods changes relative to domestic output
Indicate whether the statement is true or false
FALSE
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Answer the following statement(s) true (T) or false (F)
1. Adverse selection can cause insurance companies to limit the amount of insurance they provide to people who are "poor risks." 2. Most economists believe adverse selection played no role in the 2008 financial crisis. 3. In the moral hazard problem, people incur additional risks as a result of being insured. 4. In the principal-agent problem, the principal is the person performing work and the agent is the one for whom the work is being done. 5. If employers had to pay higher than equilibrium wages to their workers, then workers would be better off but employers would be worse off.
Compared to a situation where transaction costs are zero, the existence of transaction costs
a. will reduce the volume of trade. b. will reduce the gains from trade. c. may lead some buyers and sellers to employ middlemen. d. All of the above are correct.
A person will become informed on a political issue if
A) it is considered an important issue to society at large. B) he perceives the benefits of becoming informed as greater than the costs of becoming informed. C) it is regularly discussed on television news shows. D) it is regularly written about in the daily newspapers. E) none of the above
Suppose that a worker in Country A can make either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can make either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Suppose Country A specializes in bananas, and Country B specializes in tomatoes. The limits to the terms of trade that Country B would find acceptable are Country B will accept no:
A. less than 3 bananas for each tomato. B. more than 1 tomato for every 3 bananas. C. less than 1 tomato for every 3 bananas. D. more than 3 bananas for each tomato.