Taxes cause deadweight losses because they prevent buyers and sellers from realizing some of the gains from trade

What is the principal-agent problem?

A) It is a problem caused by a person (principal) who hires an agent to act on his behalf but is unwilling to delegate authority to the agent to carry out the task in the best possible way. B) It is a problem of the power system of boss and subordinate where the boss (principal) exerts influence over his subordinates (agents) using punishment or threat. C) It is a problem that exists when a person (principal) has more information about the task than the agent he hires to perform the task. D) It is a problem caused by agents pursuing their own interests rather than the interests of the principals who hired them.

Figure 5.1 provides support for the Fisher effect, by ________

A) displaying a positive relationship between the inflation rate and the nominal interest rate B) showing how developed economies like the U.S. and Japan have less inflation than economies like Turkey and Indonesia C) focusing on short-run fluctuations, rather than long run averages D) plotting observed, rather than expected inflation E) showing that output is unaffected by changes in the money supply