Consider a used car market in which half the cars are good and half are bad (lemons). Suppose the average price of a good car is $9,000 and the average price of a lemon is $3,000
If rational buyers are willing to pay $6,000 for a used car, then sellers will agree to sell mostly lemons at this price. What is the term used to describe this situation?
A) adverse selection B) an efficient market
C) moral hazard D) economic irrationality
A
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A foreign bank receives a deposit of $10,000 from a U.S. citizen. As a result, there is a net capital outflow from the U.S., if ________
A) the bank buys a U.S.-made computer B) the bank buys a bond issued by a U.S. company C) the bank keeps the $10,000 in a vault D) all of the above E) none of the above
Under the bimetallic standard of the 19th century:
a. the amount of money in circulation increased. b. the American dollar served poorly as a unit of account. c. only one metal tended to circulate as money at any given time. d. the government earned profits by selling gold.