Answer the following statement(s) true (T) or false (F)
1. An efficiency wage is the wage that maximizes the surplus of the worker.
2. Stockholders can use high levels of compensation and substantial severance payments to get their corporate executives to take on higher levels of risk.
3. A golden parachute is a mechanism that stockholders employ to encourage executives to be more risky than they would be without the parachute.
4. Stock options create the wrong incentive in that they create a principal-agent problem.
5. An unexpected increase in inflation, by diluting the informational content of prices, will lead to an increase in unemployment.
1. False
2. True
3. True
4. False
5. False
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During an economic expansion when real GDP increases, the
A) demand for money decreases. B) nominal interest rate is constant. C) demand for money increases. D) supply of money decreases. E) real interest rate is constant.
If government regulations increase the cost of producing gasoline while at the same time government regulations reduce the cost of driving a relatively inefficient sport utility vehicle (SUV),
A) the supply of gasoline is expected to increase. B) the demand for gasoline is expected to decrease. C) the price of gasoline is expected to increase, whereas the total consumption of gasoline can increase, decrease, or stay the same. D) the supply of gasoline is expected to decrease.
The F-test is used in forecasting to
A) establish confidence intervals for testing regression coefficients. B) examine the degree of multicollinearity among independent variables. C) determine how well a regression equation can account for dependent variable values. D) determine whether an identification problem exists.
In the short-run, demand-pull inflation increases:
A. Real wages, but in the long run only nominal wages B. Nominal wages, but in the long run only real wages C. Real output and the price level, but in the long-run only real output D. Real output and the price level, but in the long-run only the price level