Suppose the price of banana rises over time and consumers respond by buying fewer bananas. This situation contributes to which bias in the consumer price index?
a. Transportation bias
b. Substitution bias
c. Quality bias
d. Indexing bias
b
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Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund
A) make loans to the riskiest nations so that private investors will not be tempted to take a risk. B) impose tougher preconditions on borrowers. C) not make loans to risky nations because there is a high demand for funds from safer nations. D) loan only to countries that have free elections.
Demand for a food item increases by more than the supply of the food item. One thing for certain is that
A) the price of the food item rises. B) income elasticity of demand (for the food item) is greater than 1. C) the supply curve is price elastic. D) real income rises as a result. E) none of the above
Frictional unemployment will typically be a short-term problem for someone between jobs.
Answer the following statement true (T) or false (F)
Structural unemployment results when:
A. the minimum wage is set to increase in the near future. B. there is generous unemployment insurance. C. workers are temporarily laid off due to weather conditions. D. the real wage is above its market-clearing level.