Suppose a signifi cant fall in the price of certain stocks caused the market makers in those stocks to worry about their funding liquidity. Under what circumstances might that development lead to liquidity problems in markets for other assets?

18.* Consider an economy that only produces and consumes two goods—food and apparel. Suppose the infl ation rate based on the consumer price index is higher during the year than that based on the GDP defl ator. Assuming underlying tastes and preferences in the economy stay the same, what can you say about food and apparel price movements during the year?