Explain why, according to Feldstein and Horioka, one should expect that domestic investment rates diverge widely from saving rates
What will be an ideal response?
The decisions of corporations to invest and for households to save are different. Thus globalization means more and different ways to save and invest and increasing the differences between the two ratios.
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The GDP deflator but not the CPI takes into account
a. The prices of imports that consumers buy b. Investment goods bought by businesses c. Goods bought by the government d. Both b. and c.
In insurance markets, moral hazard occurs when the behavior of
A) the insured person changes in a way that raises costs for the insurer, since the insured person no longer bears the full costs of that behavior. B) the insurer changes in a way that raises costs for the insured person, since the insurer no longer bears the full costs of that behavior. C) the insured person changes in a way that eliminates rising health care costs for the insurer, since the insured person no longer bears the full costs of that behavior. D) the insured person has an incentive to under consume medical services, simply because the insured person no longer bears the full cost of medical services.