Let us suppose that you apply for a loan with a bank. You tell the bank that you are going to remodel your kitchen, but after you get the loan you go to Las Vegas to gamble with the money. Your behavior is an example of

A) adverse selection.
B) direct credit allocation.
C) moral hazard.
D) indirect credit allocation.

Answer: C) moral hazard.

Economics

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A price below the equilibrium price will:

A) result in pressure for price to rise. B) result in a surplus. C) never be the case. D) result in pressure for price to fall.

Economics

Answer the following statements true (T) or false (F)

1) Excess reserves are the amount by which required reserves exceed actual reserves. 2) Actual reserves equal required reserves plus excess reserves. 3) Commercial bank reserves are an asset to commercial banks but a liability to the Federal Reserve Bank holding them. 4) Balance sheets always balance because reserves must always equal liabilities plus net worth.

Economics