Pricing insurance policies is made difficult because buyers have more information than sellers. This difficulty is an example of
A) adverse selection. B) asymmetric information.
C) the free-rider problem. D) moral hazard.
B
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If money demand is not responsive to changes in interest rates, then
a. the LM curve is vertical. b. the IS curve determines equilibrium output. c. the LM curve will become horizontal. d. the LM curve will become vertical. e. a and b.
Over the past several years, the federal government has rescued a few financially distressed banks and other large private companies, and the key reasons for these actions is to stabilize financial markets and to prevent additional business failures
that may arise from the original problem. However, critics of these interventions argue that these actions generate a moral hazard problem. Why? A) Government oversight of rescued firms is typically based on limited information, so the outcome is economically inefficient. B) Rescued firms will have a difficult time buying insurance in private markets, so the government will also have to insure the firm against losses from fire, theft, etc. C) Managers have more information about the financial strength of their firm than government officials, so the rescue attempts may be unnecessary. D) Managers may be more likely to invest in risky projects if they believe the government will save the firm in case of failure.
Deflation means a decrease in:
a. the rate of inflation. b. the prices of all products in the economy. c. homes, autos, and basic resources. d. the general level of prices in the economy.
Which of the following is a general rule of business etiquette in the given city?
A) Beijing, China: If someone offers you his or her business car, accept it with both hands, read it immediately, and then present your business card to the person. B) Hong Kong, China: It is considered impolite to run out of business cards. C) Sydney, Australia: It is important to know about the latest sports matches. D) Berlin, Germany: When out with German business associates, try not to talk about sports. E) All of the above are examples of proper business etiquette around the world.