Effective signals
a. convey useful information from informed parties to uninformed parties.
b. impose little or no cost on the signaler.
c. cannot be conveyed accurately when there is an information asymmetry.
d. raise the quantity sold but reduce the price sellers receive.
a
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Give an example of how money functions as a unit of account
What will be an ideal response?
If you buy an insurance policy with a low deductible and no co-payments, you would end up paying
a. A higher premium b. A lower premium c. The premium of a low risk individual d. Both B&C
Many economists argue that the Fed contributed to the housing bubble by:
A. passing laws that allowed financial institutions to create credit default swaps. B. buying mortgage-backed securities for foreclosed homes. C. keeping the Fed funds rate lower than what the Taylor rule predicts. D. paying interest on bank reserves.
The principal way in which an economy self-corrects from an inflationary gap is through
A. deflation, which increases purchasing power. B. inflation, which reduces purchasing power. C. disinflation, which maintains purchasing power. D. price level decreases, which stimulate production.