In the short run, one reason why we do not define "full employment" as 0 percent unemployment is because
A. Of the direct relationship between unemployment and inflation.
B. 0 percent unemployment is consistent with price stability.
C. The closer the economy gets to capacity output, the greater the risk of inflation.
D. Of the vertical aggregate supply curve.
Answer: C
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In which of the following markets adverse selection may not occur?
a. The market for pre-owned residential apartments b. The lemons market c. The market for new sports utility vehicles d. The capital market e. The market for health insurance
Which of the following is an example of screening?
a. A lender checks a loan applicants credit history. b. When an employee purchases group life insurance without taking a physical exam, she knows more about her health than does the insurance company. c. When someone is considering buying a used car from a dealership, the seller knows the repair history of the car but the potential buyer does not. d. All of the above are correct.