How does adverse selection factor into explaining the reduced supply of loans when interest rates increase?
What will be an ideal response?
When interest rates increase it becomes more expensive for borrowers to service their debt. Lenders are aware of this and so are suspicious of those borrowers who still want to borrow at the higher rates. To the extent that information asymmetries exist, the rational move on the part of lenders may be to simply not lend.
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Variable spending arising as part of the operation and maintenance of abatement processes is known as
a. capital costs b. operating costs c. fixed costs d. implicit costs
The above figure shows the U.S. market for 1 carat diamonds. With free trade, the United States produces ________ diamonds and imports ________ diamonds
A) 300,000; 600,000 B) 0; 900,000 C) 100,000; 900,000 D) 100,000; 800,000 E) 500,000; 400,000
Refer to Table 2-9. What is Serena's opportunity cost of making a bracelet?
A) 2 necklaces B) 3/4 of a bracelet C) 1/2 of a necklace D) 1/2 of a bracelet
Starting on a Phillips curve with expected inflation equal to 5% and unemployment at its natural rate, show what happens to unemployment if the Fed tries to reduce inflation, but has no credibility
As time passes and people realize that the inflation rate is now lower, what happens to the short-run Phillips curve?