A principal-agent problem arises in the situation in Scenario 17.5 because
A) the principal can measure effort and output; the agent can measure only output.
B) the principal can measure only effort, and the agent can measure only output.
C) the principal can measure only output, and the agent can measure effort and output.
D) neither the principal nor the agent can measure effort.
E) neither the principal nor the agent can measure output.
C
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If people leave bequests primarily because they are uncertain about the timing of their deaths,
A) the marginal propensity to consume out of a temporary change in income would tend to be higher than in the simple version of the LCH. B) unrealized capital gains from higher housing prices will probably lead to a higher consumption-to-income ratio than in the simple version of the LCH. C) increases in wealth from the stock market would be consumed over a longer time horizon than in the simple version of the LCH. D) A and C are both correct.
A country's total output, or real GDP, is determined only by its aggregate production function
a. True b. False
Which central bank has its exchange rate as a focus of its monetary? policy?
A) Bank of Canada
B) Bank of England
C) European Central Bank
D) Federal Reserve
Suppose the economy is initially in long run equilibrium. Which of the following lead to an increase in price level and a decrease in real GDP in the short run?
A. decrease in health insurance premiums paid by firms raises the cost of employing labor B. increase in govt transfer payments C. increase in the cost of a key input like oil D. sharp fall in stock market prices