In the two-period model with asymmetric information, the presence of bad borrowers who always default
A) makes good borrowers better off.
B) matters only for the loan interest rate faced by bad borrowers.
C) affects the equilibrium profits of banks.
D) affects good borrowers adversely.
D
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If the graph shown is displaying a competitive market and the market is currently offering a wage less than P*:
A. there would be excess workers who want to work at that wage.
B. there would be unemployment in the market.
C. firms will have a hard time finding employees.
D. firms would be forced by government to adjust their wages back to equilibrium.
When the government runs a deficit, it will:
A. raise taxes immediately. B. buy bonds to finance the deficit. C. sell bonds to finance the deficit. D. reduce the money supply to finance the deficit.
Suppose Country A, a labor-abundant country, produces only wheat and cloth. The following equations illustrate the prices and costs of wheat and cloth in the country. The numbers indicate the amounts of labor and land needed to produce a unit of wheat and cloth. 'W' is the wage rate and 'r' is the rental rate of land.Price of wheat = 1w + 2rPrice of cloth = 2w + 1rIf the initial prices of wheat and cloth are $3 per unit then
A. the wage rate and the rental rate are $2 and $3, respectively. B. the wage rate and the rental rate are $1 and $2, respectively. C. both the wage rate and the rental rate are equal to $2. D. both the wage rate and the rental rate are equal to $1.
A primary goal of central banks is to:
A. reduce systematic risk. B. keep stock and bond prices high. C. keep inflation rates high. D. reduce the idiosyncratic risk that impacts specific investments.