The manner in which FDIC deposit insurance is set up in the United States encourages banks to
A. maintain excess reserves that are too great.
B. reject some loans that probably would be profitable.
C. make riskier loans than they otherwise would.
D. be too conservative in their lending practices.
Answer: C
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Drivers with auto insurance being more likely to act carelessly is an example of:
A. asymmetric selection. B. adverse selection. C. information optimization. D. moral hazard.
Airlines that charge higher prices for customers who purchase their tickets at the last minute are:
A. perfect price discriminators. B. lowering total economic surplus. C. price discriminating by identifying passengers with higher reservation prices. D. not price discriminating because the cost of the ticket is not the same.
Exhibit 2-19 Production possibilities curves
In Exhibit 2-19, the production possibilities curves for a country are shown for the years Year X and Year Y. Suppose this country was located at point A in Year X and would like to get to point B in Year Y. Construct a plan this country to activate in Year X to achieve this growth.
A. Eliminate unemployment, improve production technology, and acquire additional resources. B. Produce more consumption goods, eliminate unemployment, and reduce inefficiency. C. Reduce inefficiency, shift energy sources, and hold technology fixed. D. It is impossible for this country to achieve point B in Year Y.
The Federal reserves fed wire system is used mainly to provide:
A. a means for foreign banks to transfer funds to U.S. banks. B. an inexpensive and reliable way for financial institutions to transfer funds to one another. C. a means for the Treasury to collect tax payments. D. an inexpensive way for individuals to pay their bills on-line.