When is disclosure economically desirable?
A contract can contain information that is valuable to both the signing parties and outsiders. Sometimes the law requires that certain facts be disclosed in it. Disclosure is economically desirable where a failure to disclose would reduce the economic value the agreement can produce. As an example, if you put a house on the market you must generally inform potential buyers that it has structural defects or is infested by termites. A buyer with this information is in a better position to determine its suitability than one without it.
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Firms in a small economy anticipated that inventories would grow over the past year by $750,000, and over that year, inventories grew by exactly $750,000. This implies that
A) aggregate expenditure was greater than GDP that year. B) there was an unplanned decrease in inventories that year. C) there was an unplanned increase in inventories that year. D) aggregate expenditure and GDP were equal that year.
If there is an increase in government spending that is financed by issuing bonds, then
a. interest rates should rise which increases private investment. b. interest rates will remain the same unless taxes are reduced as well. c. interest rates should fall which increases private investment. d. interest rates should rise which decreases private investment. e. None of the above.