Refer to Figure 10.1. If only one light is installed, the person who is responsible for the light being installed receives a payoff of

A contract requiring payment of an annual premium in exchange for the payment of a future stream of payments beginning at a specified age and continuing until death is

A) whole life insurance. B) an annuity. C) term life insurance. D) variable life insurance. E) universal life insurance.

Suppose the exchange rates between the United States and Canada are in long-run equilibrium as defined by the idea of purchasing power parity. If the law of one price holds perfectly, then differences between U.S. and Canadian rates of inflation would

A) have no effect on nominal exchange rates. B) be completely offset by changes in the real exchange rate. C) be completely offset by changes in the nominal exchange rate. D) lead to a change in the real purchasing power of each country's currency when it is converted to the other country's currency.