Suppose that a college physics experiment goes horribly wrong and releases an electronic pulse that renders all electronic equipment in the cities of Columbus, Cleveland and Cincinnati, Ohio permanently useless. No people are hurt, and no buildings are damaged. After the accident, the wages earned by Ohio workers will
a. increase because the marginal productivities of Ohio workers will increase.
b. decrease because the marginal productivities of Ohio workers will decrease.
c. decrease because the marginal productivities of Ohio workers will increase.
d. increase because the marginal productivities of Ohio workers will decrease.
b
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For the most part, prior to 2008, banks typically held:
A. excess reserves equal to approximately 100% of deposits. B. excess reserves equal to less than 1% of deposits. C. excess reserves equal to between 10 and 20% of deposits. D. absolutely no excess reserves.
Because there is an imbalance of information in a lending situation, we must deal with the problems of adverse selection and moral hazard. Define these terms and explain how financial intermediaries can reduce these problems
What will be an ideal response?