Collateral shocks tend to amplify business Candice Butts Macro Quest

Question 77 / 142: Collateral shocks tend to amplify business cycles because

A the returns to work are higher in booms than in recessions, so people work more during booms
and less during recessions.

B assets are typically worth more in booms than in recessions, and the value of assets tends
to be positively correlated to firms' ability to obtain investment funding.

C the uncertainty of recessions tends to increase people's job search time, while greater certainty
decreases search time during booms.

D the returns to investment are higher when others are investing as well; thus we see more investment
during booms and less during recessions.

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Macroeconomics MCQ

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Candice Butts

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