Author Question: According to real business cycle theory, an increase in financial frictions might lead to ________, ... (Read 43 times)

kshipps · **on:** Jun 30, 2018

According to real business cycle theory, an increase in financial frictions might lead to ________, if ________.

A) a decrease in output; the rise in the credit spread causes a leftward shift of aggregate demand
B) a decrease in inflation; the disruption of capital markets results in a leftward shift of long-run aggregate supply
C) a decrease in output; the disruption of capital markets results in a leftward shift of long-run aggregate supply
D) a decrease in output; a decline in expected output causes a leftward shift of aggregate demand

Question 2

Of all financial intermediaries which holds the most assets?

A) pension funds
B) commercial banks
C) insurance companies
D) hedge funds