Author Question: When banks and other financial institutions become insolvent, ________. A) the problem of ... (Read 41 times)

jazziefee · **on:** Jun 30, 2018

When banks and other financial institutions become insolvent, ________.

A) the problem of asymmetric information becomes more acute
B) it is easier to distinguish the good creditors and borrowers from the bad
C) surviving creditors will attract borrower-spenders by lowering the real interest rate
D) the resulting increase in short-run aggregate supply will discourage investment

Question 2

The principle that consumers and firms optimize

A) is not helpful because some economic agents may behave irrationally.
B) is helpful because it allows us to analyze how economic agents respond to changes in their environment.
C) only applies to perfectly competitive markets.
D) is helpful because it determines the available technology.