Moral hazard is a problem in providing deposit insurance because insured banks are
A) more likely to make bookkeeping errors.
B) overly cautious due to extra regulations adopted by the FDIC.
C) more likely to provide bank managers with lavish perquisites.
D) encouraged to take on more risk.
D
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How do fears of future economic problems affect GDP?
(A) Government will spend less and save money for a future economic contraction; GDP will be reduced. (B) Consumers will spend more money in the short term to prevent future economic problems; GDP will be pushed up. (C) Businesses will invest more money in the short term to ensure higher profits in the future; GDP will be pushed up. (D) Consumers will spend less and save money in case future economic problems affect them; GDP will be reduced.
According to the traditional Keynesian approach, if the government increases spending by $5 million and raises current taxes by $5 million at the same time, then
A) real GDP will increase by $5 million. B) real GDP will decrease by $5 million. C) real GDP will decrease by more than $5 million. D) real GDP will remain the same.