Serena transfers $8,000 from her home safe to her savings account. This transaction will
A. decrease M1 and not change M2.
B. increase both M1 and M2.
C. not change M1 and decrease M2.
D. decrease both M1 and M2.
Answer: A
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Monitoring
a. Gives the principle a better performance evaluation metric b. Allows the principle to better align the incentives of the agent with the goals of the principle c. Can be costly for the principal d. All of the above
A student entering college wants to assess the value of investing in human capital. To determine whether the investment will be profitable, she should compare the
a. value of her total expected future earnings with the total of her direct and indirect costs of college. b. present discounted value of future earnings with the total of her direct and indirect costs of her education. c. present discounted value of her additional future earnings as the result of the college education with the present discounted value of only her direct costs of college. d. present discounted value of her additional future earnings as the result of the college education with the present discounted value of her direct and indirect costs of college.