Which of the following will lead to a decrease in the equilibrium interest rate in the economy?
A) a decrease in GDP
B) an increase in the reserve requirement
C) an increase in the price level
D) a sale of government securities by the Fed
E) an increase in the discount rate
A
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An insurance company is likely to attract customers like Clancy who want to purchase insurance because he knows better that the company that he is more likely to make a claim on a policy. What is the term used to describe the situation above?
A) moral hazard B) adverse selection C) asymmetric information D) economic irrationality
Edward buys a house for $400,000, rents it for one year for $1,500 per month, and sells it at the end of the year for $390,000. Edward's rate of return:
A. is 2 percent. B. is 4.5 percent. C. is negative 2.5 percent. D. cannot be determined.