As a result of asymmetric information
A)small firms are better able to secure external financing than are large firms.
B)investment spending may fall in a recession even if true investment opportunities do not change.
C)short-run fluctuations in output are smaller than they would otherwise be.
D)fluctuations in the amount of internal funds have large effects on the investment in plant and equipment carried out by mature firms.

Question

Quizplus · Accepted Answer

Asymmetric information refers to a situation where one party has more information than the other. In the case of investment spending, this means that investors may not have complete information about the true investment opportunities available. As a result, they may be more cautious during a recession, leading to a decrease in investment spending even if there are still good investment opportunities available. This can have a negative impact on economic growth.

As a Result of Asymmetric Information