One Effect of the Lemons Problem in the Used Car

question 147

Multiple Choice

One effect of the lemons problem in the used car market is that

• A)the market is efficient
• B)without reliable information, lemons become increasingly common
• C)no good cars are offered on the market
• D)no lemons are offered on the market
• E)good cars sell at more than their market value

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Definitions:

Misery Index

An economic indicator created by adding the unemployment rate to the inflation rate, proposing to reflect the average citizen's financial discomfort.

Nominal Interest Rate

The rate of interest before adjusting for inflation, representing the face value of interest payments.

Inflation

The speed at which the overall price level for goods and services increases, causing a decline in the value of money.

Deflation

A decrease in the general price level of goods and services in an economy over a period of time.