Professional athletes often have contract clauses prohibiting risky activities such as skiing and motorcycle riding. These clauses are

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A) creates moral hazard but eliminates adverse selection. B) creates adverse selection but eliminates moral hazard. C) creates both moral hazard and adverse selection. D) eliminates both moral hazard and adverse selection.

If the yield curve is flat for short maturities and then slopes downward for longer maturities, the liquidity premium theory (assuming a mild preference for shorter-term bonds) indicates that the market is predicting

A) a rise in short-term interest rates in the near future and a decline further out in the future. B) constant short-term interest rates in the near future and a decline further out in the future. C) a decline in short-term interest rates in the near future and a rise further out in the future. D) a decline in short-term interest rates in the near future and an even steeper decline further out in the future.