Steve borrowed some money from Summit Bank, telling the loan officer that he intended to use the money to remodel his restaurant. After getting the loan, Steve and his girlfriend immediately took the money and went gambling in Vegas
a. This is an example of adverse selection since banks have difficulty selecting their customers.
b. This example does not involve asymmetric information.
c. From the given information, Steve is the principal and Summit Bank is the agent.
d. None of the above are correct.
d
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In a competitive price-searcher market, the marginal revenue of the firm will always be
a. a horizontal line. b. greater than price. c. less than price. d. equal to price.
To eliminate an AD shortfall of $120 billion when the economy has an MPC of 0.75, the government should decrease taxes by
A. $400 billion. B. $40 billion. C. $120 billion. D. $30 billion.
Bank reserves will increase over time when:
A. the Fed sells government securities on the open market. B. the Treasury sells government securities on the open market. C. depositors take funds out of their checkable deposit accounts. D. the Fed buys government securities on the open market.
Using the specific factors model, assume that strawberry production requires the specific factor of land, tractor production requires the specific factor of capital, and labor is variable. If the United States is capital abundant compared to Mexico, and Mexico is land abundant compared to the United States, then in the short run with trade we would expect
A) the income of U.S. land owners to increase. B) the income of U.S. workers to increase. C) the income of Mexican workers to increase. D) the income of Mexican land owners to increase.