The "too big to fail" policy of the Fed, whereby some banks are bailed out if they are in danger of failing because they are too big and could bring the system down, leads to which of the following problems?
A. Adverse selection
B. Externalities
C. Moral hazard
D. Public goods
C. Moral hazard
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According to purchasing power parity, a rise in inflation in the United States. relative to the rest of the world will lead to
A) a balance of payments surplus. B) a balance of payments deficit. C) an exchange rate appreciation. D) an exchange rate depreciation.
In the new Keynesian model, if an aggregate demand increase is unanticipated, then ________
A) aggregate demand will not change B) short-run aggregate supply will shift up immediately C) short-run aggregate supply will shift down immediately D) there is no immediate effect on the short-run supply curve
A tax is proportional if, as a person's income rises, the:
a. tax rate is constant. b. tax rate falls. c. tax rate rises. d. amount of the tax is constant. e. amount of the tax falls.
If the economy is at potential output, actual inflation
A. equals expected inflation. B. is less than expected inflation. C. is greater than expected inflation. D. equals the natural rate of unemployment.