Selling bonds to finance new government debt leads to an opportunity cost that is
A. Greater than when government debt is financed with taxes.
B. The same as financing government debt with taxes.
C. Less than when government debt is financed with taxes.
D. Dependent on who buys the bonds.
Answer: B
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If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects, banks are said to face the problem of
A) adverse credit risk. B) adverse selection. C) moral hazard. D) lemon lenders.
Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis, if the utility for the two goods "x" and "y" can be measured as U = y, then it can be concluded that
A) "x" and "y" are perfect complements. B) "x" is a "bad". C) the indifference curves on the x,y graph are upward sloping. D) the indifference curves on the x,y graph are horizontal.