The use of signals in a market economy
a. makes everyone better off, even those people who choose not to obtain the signal.
b. prevents the economy from reaching an equilibrium.
c. lowers efficiency because the signals waste resources.
d. is one way that the principal-agent problem can be avoided.
c. lowers efficiency because the signals waste resources.
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What is adverse selection?
A) It refers to the private, self-interested actions people that people pursue, which when taken collectively leads to a loss in economic surplus. B) It refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off. C) It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction. D) It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.
If the expansionary monetary policy reduces real interest rates in the U.S., which of the following is most likely to occur?
What will be an ideal response?