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Q1. expansionary monetary policy.
How would this typically affect businesses?– higher taxes
– Lower taxes
– lower interest rates
– reduce availability of credit
– lower government subsidies
– higher government subsidies
– Higher interest rates
– increase availability of creditQ2. Which of the following is true regarding agency theory?
-Directors are known as principal
-agency problem can be avoided by providing bonus based on company performaces
-there is agency cost for shareholders dealing with agency problems
– agency problem can be avoided by providing share option scheme as remuneration
– Information between agents and principal are symmetrical
– Agents tend to make decision which benefits themself
– Agents are given full autonomy
– setting up remuneration committe helps reduce agency problem
– Shareholders appoint directors as agents to represent them
Hi , I’m reviewing the effects of contractionary fiscal policy on businesses & agency theory andI’m unsure which of the following answers is correct. Could you help clarify this for me? Thank you!
1st question
Expansionary monetary policy typically involves lowering interest rates and increasing the money supply to stimulate economic growth.
This can have the following effects on businesses:
Increase availability of credit
Lower interest ratesThe 2nd question
According to agency theory, conflicts of interest can arise between principals and agents due to differences in their goals and incentives.
The theory suggests that principals can reduce agency costs by implementing mechanisms to align the interests of agents with their own, such as performance-based compensation schemes.So true are
Information between agents and principal are symmetrical.
Setting up a remuneration committee helps reduce the agency problem.
Shareholders appoint directors as agents to represent them.
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