Expectations that disposable income will increase in the future will _____
a. shift the current consumption function upward
b. shift the current consumption function downward
c. result in an upward movement along the current consumption function
d. make the current consumption function flatter
e. make the current consumption function steeper
a
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If the nominal rate of interest on a bond was 5 percent, the inflation rate was 3 percent and an individual was in a 25-percent tax bracket, the after-tax real return on the bond would be equal to
a. 2 percent. b. 2.5 percent c. .5 percent.. d. -.5 percent. e. none of the above.
What is "asymmetric information"?
What will be an ideal response?
The U.S. government does not allow toggle switches for power windows in automobiles. The National Highway Traffic Safety Administration found that the regulation will save about two children every three years and have negligible costs because the industry will have plenty of time to incorporate new switches into future vehicles. Evaluating this rule in terms of costs and benefits, an economist most likely would conclude that:
A. it is a bad decision because the chances of a child dying (less than one per year) are so small that they can be ignored. B. we cannot tell if it is a good decision without knowing the ages of the children who might be saved by the regulation. C. it fails because it should take effect immediately, not after four years. D. it is a good decision because the benefits exceed the costs.
Adverse selection and moral hazard problems arise when there is
A. symmetric information. B. too much information. C. asymmetric information. D. complete information