According to real business cycle theory, an increase in financial ...

[kshipps]

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

[abro1885]

Answer to Question 1

C

Answer to Question 2

B

[kshipps]

Thanks for the timely response, appreciate it

[JaynaD87]

Gracias!