Imagine a World in Which Landlords Always Fix Problems Quickly,while

question 109

Multiple Choice

Imagine a world in which landlords always fix problems quickly,while tenants never damage property and always pay their rent on time.In such a world,

• A) lease agreements would still exist to solve the commitment problem.
• B) lease agreements would be unnecessary.
• C) lease agreements would only serve the interests of landlords.
• D) lease agreements would only serve the interests of tenants.
• E) rents would rise.

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Definitions:

Price Level

An index of the aggregate prices of all goods and services in an economy, often measured by a consumer price index or GDP deflator.

Inflation Tax

An implicit tax where the government benefits from inflation by reducing the real value of public debt, but it also reduces the purchasing power of money held by the public.

Central Bank

The main monetary authority of a country, which regulates the supply of money and interest rates, aiming to maintain price stability and economic growth.

Inflation

A measure of the rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.