What is the difference between a repeated and a nonrepeated game, and in which form is reputation an important consideration?
What will be an ideal response?
A nonrepeated game is one where the game is played only once. A repeated game is one where the same game is played a number of times by the same set of players. Reputation is important in a repeated game context because the rivals may have to cooperate to get a better outcome.
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Debt deflation occurs when
A) an economic downturn causes the price level to fall and a deterioration in firms' net worth because of the increased burden of indebtedness. B) rising interest rates worsen adverse selection and moral hazard problems. C) lenders reduce their lending due to declining stock prices (equity deflation) that lowers the value of collateral. D) corporations pay back their loans before the scheduled maturity date.
Refer to Figure 9.9. Now suppose an import quota of 3000 trucks is imposed. Government revenue from the quota will be
A) $0. B) $2,500. C) $7,500,000. D) $12,500,000. E) $13,125,000.
Which of the following does the crowding-out effect stress?
What will be an ideal response?
Suppose a temporary tax cut today is combined with a rise in tax rates on the next generation of taxpayers. This long delay in increasing future taxes would not in itself cause the Ricardian equivalence proposition to fail to accurately predict the effects of the tax cut, unless the
A. parents were far-sighted in their expectations of future tax increases. B. parents saved the tax cut. C. parents failed to leave bequests. D. parents invested the tax cut.