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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Stagflation occurs when the economy experiences:
a. low unemployment and low inflation. b. high unemployment and rapid inflation. c. low unemployment and rapid inflation. d. high unemployment and low inflation.
If there is a large increase in the price of oil, which of the following would most likely occur in the short run?
a. The aggregate demand curve shifts upward, the price level rises, and output increases. b. The aggregate supply curve shifts downward, the price level falls, and output increases. c. The aggregate demand curve shifts downward, the price level falls, and output falls. d. The aggregate demand curve shifts upward, output remains unchanged, and the price level rises. e. The aggregate supply curve shifts upward, the price level rises, and output falls.