moral hazard
What will be an ideal response?
situation where one party to a contract takes a hidden action that benefits him or her at the expense of another party
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Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C
Specializing in the production of a good or service in which one has a comparative advantage enables a country to do which of the following?
A) increase the variety of products that it can produce with a decrease in resources B) consume a combination of goods that lies outside its own production possibilities frontier C) produce a combination of goods that lies outside its own production possibilities frontier D) never have to engage in trade with other nations
If the economy is currently in a recessionary gap,
A) all economists will agree that the economy can remove itself from the recessionary gap without government intervention. B) some economists will argue that the economy can remove itself from the recessionary gap without government intervention. C) no economist will state that the economy can remove itself from the recessionary gap without government intervention. D) all economists will agree that over time the recessionary gap will worsen.
At his current level of consumption, Evan gets twice as much marginal utility from an additional bottle of water as that from an additional bottle of soda. If the price of soda is $1.00 per bottle, then Evan is maximizing utility if the price of a bottle of water is:
A. $1.50 B. $2.00 C. $0.50 D. $1.00