Which of the following best illustrates moral hazard?
a. After a person obtains life insurance, she takes up skydiving.
b. A person obtains insurance knowing he is in poor health.
c. A person holds stock only in very risky corporations.
d. A person holds stocks from only a few corporations.
a
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Harry Truman is credited with the statement, “Give me a one-armed economist,” because economists are likely to say, “On the one hand, . . . on the other hand.” Why do economists “waffle” more than physicists or chemists?
What will be an ideal response?
If the banking system has a required reserve ratio of 40 percent, then the money multiplier is
A) 2. B) 2.5. C) 4. D) 8.
In the long run, a firm can vary
A) its capital but not its labor. B) its labor but not its capital. C) both its labor and its capital. D) neither its labor nor its capital.
A government-imposed restriction on the quantity of a specific good that another country is allowed to sell in the U.S. is
A) a regional trade bloc. B) an import quota. C) a voluntary import expansion. D) a voluntary restraint agreement.