How does asymmetric information, or differences in the
information known to parties in a transaction, lead to market
failure?
What are examples of solutions to asymmetric information or ways
to mitigate the problem?
Explain the concept of asymmetric information in general.
Discuss the implications of asymmetric information for the market
of deposits, the credit market and the inter-bank market.
[50 marks]
Question 5
Discuss the role of asymmetric information in causing financial
frictions and subsequently
financial crises.
Question 6
Assume that currently the discount rate is 3%, the federal fund
rate 3% and the interest rate on
reserves is 0.5%. Suppose the Federal Reserve wants to lower the
federal funds rate. Which of
the following policy tools is more effective, a change in discount
rate or a change in the interest
rate on reserves? Use a supply and demand for reserves...
How, in general, can a financial crisis lead to a recession?
What, in particular, precipitated the severe recession of
2007-2009? Include in your discussion what role the government,
businesses, and consumers played in the economic downturn.
How, in general, can a financial crisis lead to a recession?
What, in particular, precipitated the severe recession of
2007-2009? Include in your discussion what role the government,
businesses, and consumers played in the economic downturn.
Discuss why using financial accounting information for
managerial decision-making may lead to distorted decisions.
(Specific examples need to be provided with 3 aspects)
Discuss why using financial accounting information for
managerial decision-making may lead to distorted decisions (please
use specific examples to illustrate your points and limit your
answer to 600 words or less)