Deposit insurance is a system in which the government guarantees that:
A. people can have deposits at commercial banks.
B. commercial banks will not lose any deposits.
C. depositors will not lose any money even if their bank goes bankrupt.
D. commercial banks will not go bankrupt.
Answer: C
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If the economy is on the LM curve, but is to the right of the IS curve, aggregate output will ________ and the interest rate will ________
A) rise; rise B) rise; fall C) fall; rise D) fall; fall
Suppose a consumer's expected utility function given two possible states of nature A and B can be expressed in terms of dollars worth of food consumption, F, in both states as U(FA, FB) = [0.6 × ln(FA)] + [0.4 × ln(FB)]. For this utility function, MUA is (0.6/FA) and MUB is (0.4/FB). Without insurance, the consumer can consume 200 in state A but only 50 in state B. The consumer can purchase insurance at a premium of 50 cents per dollar of benefit. How much insurance will she purchase?
A. $50 B. $150 C. $250 D. $416.67
If the quantity of a good that buyers are willing to buy rises sharply when the price falls, this illustrates what principle?
A. Ceteris paribus B. Market equilibrium C. The law of supply D. The law of demand
In the presence of negative externalities, ________ is produced and in the presence of positive externalities, ________ is produced.
A. too much of the good; the right amount of the good B. the right amount of the good; too little of the good C. too little of the good; too much of the good D. too much of the good; too little of the good