The introduction of a new good
a. increases the cost of maintaining the same level of economic well-being.
b. decreases the cost of maintaining the same level of economic well-being.
c. has no impact on the cost of maintaining the same level of economic well-being.
d. may increase or decrease the cost of maintaining the same level of economic well-being, depending on how expensive the new good is.
b
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Incentive compensation schemes are more likely to be value enhancing if:
A. they can accurately account for the dysfunctional behavior of the principal. B. they can minimize the administrative cost borne by the agent. C. they are designed to limit the agent's gaming behavior. D. they are designed to minimize the principal's average cost.
If a borrower and lender agree to an interest rate on a loan when inflation is expected to be 7 percent and inflation turns out to be 10 percent over the life of the loan, then the borrower ________ and the lender ________.
A. gains; loses B. loses; gains C. is not affected; gains D. gains; gains
Discrimination:
A. affects the distribution of domestic output and income, but not its total size. B. is shown as some point outside of an economy's production possibilities curve. C. places the economy at some point inside of its production possibilities curve. D. affects the total size of domestic output and income but not its distribution.
Which of the following will increase the total amount of reserves banks are holding?
A. A bank increases the number of loans to firms and households. B. A bank borrows reserves from the Federal Reserve. C. A bank attracts new customers depositing funds into their checkable deposits. D. The Federal Reserve reduces the reserve requirement.