How does asymmetric information affect market outcomes?
Consider, first, a market with symmetric information. Both buyers and sellers have full information about the good. Look at the demand curve and compare it to a demand curve that would obtain without full information. If the undisclosed information is harmful to the sale of the good (which is why it's undisclosed), then the consumer's demand curve would be positioned to the right of the full-information curve, the result, higher quantity and price. That's market failure.
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Which of the following was an argument for using fiscal policy in situations like the Great Recession?
a. Congress can act quickly. b. The size of a recessionary gap may require the use of both fiscal and monetary policy. c. Once the federal funds rate is reduced to zero, monetary policy is less effective. d. all of the above
The federal government debt equals
A) tax revenues minus government spending. B) government spending minus tax revenues. C) the accumulation of past budget deficits. D) the total value of U.S. Treasury bonds outstanding.