Evaluate whether the following statements are True, False, or Uncertain. Explain your answer. You MUST provide...
Evaluate whether the following statements are True, False, or Uncertain. Explain your answer. You MUST provide an explanation to receive ANY marks for these questions! Moral hazard is a term used to describe the phenomenon under which the uniformed side of a deal gets exactly the wrong people trading with it.
Homework Answers
The above statement is False. As the phenomenon under which the uniform side of a deal gets exactly the wrong people trading with it is referred to as an Adverse Selection. For instance, banks are likely to lend to those individuals that are generating more interest income due to the risk involved in the venture.
Whereas, Moral hazard refers to a situation where one party changes their behavior after a deal is conducted. For instance, an individual borrows from a bank to buy a car/house. But due to the existence of asymmetric information, the uses the loan money for gambling rather than using it for pre-specified purposes.
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Evaluate whether the following statements are True, False, or
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Part A: True/False/Uncertain Questions Indicate whether each of the following statements is true, false or uncertain and explain why. Most of the marks depend on the quality of the explanation - unsupported answers will receive little or no marks. Each question is worth 5 marks for a total of 20 marks. (1) An increase in the tax rate has the same effect on the aggregate expenditure function as a decrease in government spending.
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True, False, Uncertain State whether each of the following statements is true, false or uncertain. Explain and...
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Please indicate whether the following statements are True, False or Uncertain. Support your answer with an...
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Are the following statements true, false, or uncertain? Explain your answer (c) If there are no...
Are the following statements true, false, or uncertain? Explain
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Part A: True/False/Uncertain Questions Indicate whether each of the following statements is true, false or uncertain and explain why. Most of the marks depend on the quality of the explanation - unsupported answers will receive little or no marks. Each question is worth 5 marks for a total of 20 marks. (1) An increase in the tax rate has the same effect on the aggregate expenditure function as a decrease in government spending.
Short Questions Please indicate whether the following statements are True, False or Uncertain. Support your answer with an explanation (one to two sentences) or a diagram (75% of credit is based on your explanation!) 1. The government should only intervene in the economy when there are market failures. [2 marks 2. A utilitarian social welfare function implies that income redistribution from rich to poor will reduce social welfare. [2 marks] 3. A policy intervation will increase social welfare if and...
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your answer
(c) If there are no firms, only individuals trading with one another (an exchange economy), and everyone has the same marginal rate of substitution, then the allocation of resources is Pareto efficient. (d) Consider two social welfare functions, SWFA - U 2U2 and SWF min (Ui, U2)
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