An example of a transfer payment is
A) the President's salary.
B) unemployment insurance benefits.
C) a payment to a defense contractor.
D) court costs paid by the defendants in a law suit.
Answer: B
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Which of the following is likely to arise in a market with asymmetric information?
A) Moral hazard B) A pecuniary externality C) A positive externality D) A prisoners' dilemma
The main differences between the bank and the nonbank institutions include all of the following EXCEPT
A) banks are regulated by the Fed while nonbank institutions are not. B) banks obtain the funds to buy investment by attracting deposits while nonbank institutions borrow funds. C) banks hold more equity then nonbank institutions. D) banks' balance sheets include assets and liabilities while nonbank institutions' balance sheets include only liabilities.
As the Fed shifted to a highly expansionary monetary policy during the second half of 2008, why were banks reluctant to extend loans and make investments?
a. Banks did not have enough excess reserves to extend loans and make investments. b. The demand for loans was weak and the business climate was uncertain. c. The rate of return on short-term investments was high, so banks were reluctant to make long-term investments. d. The interest rate that the Fed pays on excess reserves was maintained at a high rate.
You and your sister share a room. Your sister prefers sleeping with all windows closed, while you prefer sleeping with at least one window open to let in some fresh air
Since neither of you are willing to give up your own preferences, you end up fighting every night. Is there a possible solution to this problem if you value keeping your windows open at night for $100, while your sister values keeping the windows closed at night for $80?