Which of the following is a possible government solution to the problem posed by a good with an external benefit?
A) Give a voucher to buyers of the good.
B) Tax the consumption of the good.
C) Tax the production of the good.
D) All of the above are possible solutions.
A
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From time to time, the Federal Reserve sells various quantities of government bonds to the private sector through a process called
A) bond recall procedures. B) open market sales. C) backflip bond investments. D) voluntary redemption procedures.
One reason for the controversy surrounding the decision by the European Central Bank to buy Greek bonds was that:
A) it may increase moral hazard by encouraging other European governments to issue more debt than private investors were willing to buy B) it may increase adverse selection by encouraging other European governments to issue more debt than private investors were willing to buy C) it may result in higher risk premiums as private investors anticipate a default by Greece D) it may worsen the Greek recession by increasing Greek interest rates