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# Problem Set _5 ANSWERS - Name(Last name first name SID GSI...

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Problem Set #5 (Spring 2011) 1/5 Name: _________________________ (Last name, first name) SID: _________________________ GSI: _________________________ Econ 100B Macroeconomic Analysis Professor Steven Wood Spring 2011 Problem Set #5 ANSWERS Due: April 19, 2011 (in class before 3:50:01 p.m.) Turn your completed problem set in to your GSI Please sign the following oath: The answers on this problem set are entirely my own work. I neither copied from the work of others nor allowed others to copy from my work. _______________________________________ Signature Any problem set turned in without a signature will be assigned a grade of zero. Problem Set Instructions 1. You MUST complete your problem set on this template. 2. Graphs and equations MAY be drawn by hand. When drawing diagrams, clearly and accurately label all axis, lines, curves, and equilibrium points. 3. Explanations MUST be word-processed. Your explanations should be succinct and to the point.

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Problem Set #5 (Spring 2011) 2/5 A. Multiple Choice Questions (15 points) . Circle the letter corresponding to the best answer (3 points each). 1. According to agency theory: a. The problem of asymmetrical information can never be completely eliminated. b. The problem of mornal hazard could be eliminated by the appropirate government policies. c. The problem of adverse selection could be eliminated by the appropriate government policies. d. Adverse selection and moral hazard are not big enough problems that they need to be minimized or eliminated. 2. Suppose that credit spreads in the financial markets increase substantially. Within the framework of the IS- MP-AD/AS model, this would be represented by:
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Problem Set _5 ANSWERS - Name(Last name first name SID GSI...

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