Problem #23 Imagine that in a given point in time the economy suffers through a recession. We can expect that during such an episode

a) asset prices will be more informative, as the number of constrained investors is likely to increase b) asset prices will be less informative, as the number of constrained investors is likely to fall c) informativeness of asset prices will be unaffected d) None of the above

ans D reason

Problem #24 Assuming that contractual imperfections are important and that investors must routinely post collateral if they wish to borrow we can argue that

a) governments should take actions to boost asset prices during recessions as to make the collateral more valuable b) it was wise for the Japanese government not to intervene in the asset markets when the housing bubble burst in Japan in 1990 c) the US government should puncture the current bubble in the American asset markets d) None of the above

ans A reason