The money market model is concerned with ________ and the loanable funds market model is concerned with ________
A) short-term real interest rates; long-term nominal interest rates
B) short-term nominal interest rates; long-term nominal interest rates
C) short-term real interest rates; long-term real interest rates
D) short-term nominal interest rates; long-term real interest rates
Answer: D
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Which of the following goods would have the most inelastic demand?
A) bread B) big screen TVs C) luxury cars D) ski vacations
Production possibilities frontiers are usually bowed outward. This is because
a. the more resources a society uses to produce one good, the fewer resources it has available to produce another good. b. the opportunity cost of producing a good decreases as more and more of that good is produced. c. of the effects of technological change. d. resources are specialized; that is, some are better at producing particular goods rather than other goods.
Suppose the government of South Island has fixed the value of its currency, the Islandia, at $0.50 per Islandia, but the market equilibrium value of the Islandia is $0.25 per Islandia. In order to maintain the official value of the Islandia the Central Bank of South Island must either ________ domestic interest rates or purchase Islandia, which causes the supply of international reserves to ________.
A. lower; decrease B. lower; increase C. raise; increase D. raise; decrease
If a doctor knows that an insurance company will pay for most of a patient's bill, the doctor has more of an incentive to require additional medical procedures and tests, even if the patient may not require them. This is an example of
A) moral hazard. B) the principal-agent problem. C) asymmetric information. D) adverse selection.