How is the separation of ownership from control related to the principal-agent problem?
What will be an ideal response?
The principal-agent problem results when an agent pursues his own interests rather than the interests of the principal who hired him. This can be a problem for a corporation because the managers of a firm (the agents) may choose to pursue policies that benefit themselves rather than the firm's stockholders (the principals). Stockholders would benefit from a policy that yields higher profits but managers may consider the policy too risky and prefer to take fewer risks even at the expense of possible future profits. Because most shareholders are divorced from the daily operation of the firm they may be unaware of the choices managers make.
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The significant increases in oil prices during the late 2000s was an example of
A) an aggregate demand shock that increased the price level and increased the rate of growth of real Gross Domestic Product (GDP). B) an aggregate demand shock that reduced the price level and reduced the rate of growth of real Gross Domestic Product (GDP). C) an aggregate supply shock that increased the price level and reduced the rate of growth of real Gross Domestic Product (GDP). D) an aggregate supply shock that reduced the price level and increased the rate of growth of real Gross Domestic Product (GDP).
The only major disadvantage of paper money is that it is hard to divide into smaller denominations
a. True b. False Indicate whether the statement is true or false