How can restrictive covenants help to reduce moral hazard in bond markets?
What will be an ideal response?
Restrictive covenants either place limits on the uses of the funds the borrower receives or require that the borrower pay off the bond if the borrower's net worth drops below a certain level.
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Why have poor nations invested so much money in education and health? Evaluate the soundness of these reasons
What will be an ideal response?
Noise traders involves investors who
A) overreact to good and bad news. B) strictly follow the efficient markets hypothesis. C) filter out the noise involved in following their stocks. D) ignore new information about stocks.
The long-run price elasticity of demand is usually larger than the short-run price elasticity of demand because:
a. demand curves tend to become steeper over time. b. economists take the absolute value of long-run price elasticities but not of short-run elasticities. c. people have more time to find substitute goods. d. incomes tend to rise over time. e. supply curves change over time.
A monopsony is an example of:
A. a buyer holding market power. B. a seller holding market power. C. an efficient market with no market power. D. a single seller holding all market power.