What is a business cycle?
What will be an ideal response?
The business cycle is the recurrent but irregular upward and downward movements in production and jobs. A downward movement is called a recession and an upward movement is called an expansion. At the top of the cycle, when an expansion gives way to a recession, is a peak. At the bottom of the cycle, when a recession gives way to an expansion, is a trough.
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In order to reduce the ________ problem in loan markets, bankers collect information from prospective borrowers to screen out the bad credit risks from the good ones
A) moral hazard B) adverse selection C) moral suasion D) adverse lending
Using the ISLM model, show graphically and explain the effects of a monetary contraction. What is the effect on the equilibrium interest rate and level of output?
What will be an ideal response?
Herd behavior can best be described as
A) the large number of investors involved in the stock market. B) how large participation in financial markets increase market efficiency. C) informed investors can outperform relatively uninformed investors. D) relatively uninformed investors follow the behavior of other investors instead of consider fundamentals.
In a labor-market pooling equilibrium with high-skill and low-skill workers and where a costly educational degree is used as a signaling device,
A) the high-skill workers' wage is larger than the low-skill workers' wage. B) the low-skill workers' wage is zero. C) the high- and low-skill workers receive the same wage. D) the high-skill workers' wage is equal to the low-skill workers' wage plus the cost of obtaining a degree.