An Increase in the Price of Irish Whiskey Imported into the United

question 73

Multiple Choice

An increase in the price of Irish whiskey imported into the United States will be reflected in

• A)both the U.S.GDP deflator and the U.S.CPI.
• B)neither the U.S.GDP deflator nor the U.S.CPI.
• C)the U.S.GDP deflator,but not the U.S.CPI.
• D)the U.S.CPI,but not the U.S.GDP deflator.

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Definitions:

Moral Hazard

A situation in economics where one party is more likely to take risks because the costs that could result will not be borne by the party taking the risk.

Unobservable Characteristics

Traits or attributes of an entity that cannot be directly measured or seen but influence outcomes.

Adverse Selection

Adverse selection is a situation in which an asymmetry of information between buyers and sellers results in the failure to facilitate optimal market outcomes, often seen in insurance markets where those most likely to claim insurance are also the most likely to purchase it.

Moral Hazard

The tendency of a person or entity to take risks because the negative consequences of the risk will be borne by another party.