In Most of the Macroeconomic Models Built Before the Crisis

question 26

Multiple Choice

In most of the macroeconomic models built before the crisis, what role did the financial system and intermediation play?

• A) The role of banks and other financial institutions in the economy was largely ignored.
• B) Banks and other financial institutions were a regular feature of macroeconomic models but played a minor role.
• C) Most of the work on the elements needed to understand the crisis was carried out in the fields of finance or corporate finance so that these elements were not fully incorporated.
• D) Both A and B.
• E) Both A and C.

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Definitions:

Straight-Line Demand

A demand curve that displays a constant relationship between price and quantity demanded, represented graphically as a straight line.

Price Ranges

The spectrum of possible prices at which a good or service can be bought or sold, varying by market conditions, quality, location, and other factors.

Elasticity

A concept that measures the responsiveness of one variable in relation to changes in another variable, often used in economics to describe how changes in price affect supply or demand.

Linear Demand Curve

A graphical representation of the relationship between the quantity of a good that consumers are willing to buy and its price when the relationship is directly proportional.