Author Question: When the credit spread rises, an effective policy response might be to ________. A) lower the ... (Read 45 times)

jwb375 · **on:** Jun 30, 2018

When the credit spread rises, an effective policy response might be to ________.

A) lower the real interest rate on safe assets
B) prevent the real federal funds rate from falling below zero
C) pursue nonconventional monetary policies to restore the functioning of financial markets
D) announce swift and stern action against those responsible for the financial disruption

Question 2

The Vuvuza Corporation currently has 10 million shares of stock outstanding, the stock is trading for 42 per share, and its stock of capital goods is valued at 70 million.

Based on the Tobin's q value for the Vuvuza Corporation, we would expect Vuvuza to A) increase its capital stock.
B) depreciate more of its assets.
C) issue more shares of stock to be able to afford to finance investment expenditures.
D) cut back on current production.