In a two-period model with production, a shock that shifts the ...

[BrownTown3]

In a two-period model with production, a shock that shifts the output demand curve to the right, and does not shift the output supply curve
 
  A) causes an increase in the current account surplus and an increase in real output.
  B) causes no change in the current account surplus and an increase in real output.
  C) causes a decrease in the current account surplus and no change in real output.
  D) causes a decrease in the current account surplus and an increase in real output.

Question 2

Do you think that information technologies will someday eliminate asymmetric information problems?
 
  What will be an ideal response?

[srodz]

Answer to Question 1

C

Answer to Question 2

No. The most advanced conceivable technologies will not enable one to expose intentions or to predict the future. Rapid, low cost dissemination of verifiable information lowers transaction costs and improves the allocation of funds, but there will remain the challenge of minimizing the funding of borrowers whose incompetence and/or malice is concealed rather than revealed by the available information.