Describe the characteristics of an efficient contract between a principal and an agent
What will be an ideal response?
An efficient contract is efficient in production. The principal's and agent's combined value of the contract is maximized. An efficient contract is also efficient in risk bearing. The risk sharing is optimal so that a relatively less risk-averse person bears more of the risk.
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According to the aggregate expenditure model, when faced with unwanted inventory, firms
A) do nothing and wait for equilibrium to be restored. B) are forced to go out of business. C) immediately cut prices. D) decrease production. E) increase production.
Since the mid-1980s, if the Fed wanted to shift to a more expansionary monetary policy, it would
a. expand the reserves available to the banking system, which would drive down short-term interest rates. b. reduce the reserves available to the banking system, which would drive down short-term interest rates. c. expand the reserves available to the banking system, which would drive up short-term interest rates. d. reduce the reserves available to the banking system, which would drive up short-term interest rates.