How does adverse selection in financial markets affect the method by which firms raise funds?
What will be an ideal response?
When investors have difficulty obtaining information on good firms, the cost of raising funds for those firms increases. This situation forces many firms to grow primarily through investment of internal funds.
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If the Fed sells government securities to a member of the nonbank public, then the resulting effect on the quantity of money is
A) that there is no change in the quantity of money. B) much larger than if the securities were sold to a bank. C) much smaller than if the securities were sold to a bank. D) the same as if the securities were sold to a bank. E) None of the above answers is correct.
The common ownership of natural resources frequently leads to
(a) an efficient resource allocation. (b) an even distribution of resources. (c) an uneven distribution of resources. (d) a productive use of resources.
Which of the following are not reasons for the low productivity in developing countries?
a. Few natural resources b. Developed capital infrastructure c. Poor financial system d. Inefficient use of labor
Macroeconomics primarily examines:
A. the behaviour of individual households and firms. B. how prices are determined within individual markets. C. broad issues such as national output, employment and inflation. D. the output levels that maximize the profits of business firms