What are the benefits of bankruptcy laws that enable lenders to seize the assets of firms that default on loan contracts?
What will be an ideal response?
When borrowers are aware that default will lead to asset seizure, they will work harder to avoid default. When lenders know that borrowers will do all they can to avoid default, they will offer more funds at lower cost. The result is more and more-productive economic activity. When default occurs, the seizure of assets is a reallocation of resources that raises their value and supports economic growth.
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In perfect competition, the product of a single firm
A) has many perfect substitutes produced by other firms. B) has many perfect complements produced by other firms. C) is sold under many differing brand names. D) is sold to different customers at different prices.
In a simple macroeconomic model, replacing the assumption of exogenous investment with the accelerator theory of investment ________ the effect on equilibrium GDP of fiscal policy changes, and ________ the effect on equilibrium GDP of changes in
autonomous consumption. A) increases, increases B) increases, dampens C) dampens, increases D) dampens, dampens