Yusuf Is Planning to Sell His Home

question 20

Multiple Choice

Yusuf is planning to sell his home. In preparation for the sale, he paints all of the ceilings in his house to cover up water stains from his leaking roof so that potential buyers will be unaware of this problem. This is an example of

• A) moral hazard.
• B) screening.
• C) adverse selection.
• D) the principal-agent problem.

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Definitions:

Cyclically Balanced

A term that might not be widely recognized in standard economic literature; if intended to mean maintaining balance over economic cycles, it could refer to the aim of achieving economic stability across different phases of economic cycles.

Automatic Stabilizers

Economic policies and programs designed to offset fluctuations in a nation's economic activity without intervention by the government or policymakers.

Falling Output

Falling output describes a situation where an economy or a particular sector is producing less goods or services over time.

Budget Deficit

A financial situation where government expenditures exceed its revenues.