Economics 2154A/B Ch9

11 Pages
249 Views
Unlock Document

Department
Economics
Course
Economics 2154A/B
Professor
Desmond Mc Keon
Semester
Fall

Description
Chapter 9 Financial Crises1 A major disruption in financial markets characterized by sharp declines in asset prices and firm failures is called a A financial crisis B fiscal imbalance C freerider problemD lemons problem2 Asymmetric information problems that act as a barrier to efficient allocation of capital are often described as A financial treasonB financial markets C financial frictionsD financial allocations92 Dynamics of Financial Crises in Advanced Economies1 The elimination of restrictions on financial markets and institutions is also known asA financial engineeringB financial lendingC financial liberalization D financial deleveraging2 Financial crises A are major disruptions in financial markets that are characterized by sharp declines in assetprices and the failures of many financial and nonfinancial firmsB occur when adverse selection and moral hazard problems in financial markets become lesssignificantC frequently lead to sharp expansions in economic activityD are a freerider problem3 A financial crisis occurs when an increase in asymmetric information from a disruption in thefinancial system A causes severe adverse selection and moral hazard problems that make financial marketsincapable of channelling funds efficientlyB allows for a more efficient use of fundsC increases economic activityD reduces uncertainty in the economy and increases market efficiency4 The dark side of financial liberalization is A market allocationsB credit boomsC currency appreciation D financial innovation5 When the value of loans begins to drop the net worth of financial institutions falls causingthem to cut back on lending in a process called A deflation B releveraging C capitulationD deleveraging6 When financial institutions go on a lending spree and expand their lending at a rapid pace theyare participating in a A credit bust B credit boom C deleveraging D market race7 When financial intermediaries deleverage firms cannot fund investment opportunitiesresulting in A a contraction of economic activity B an economic boomC an increased opportunity for growthD a call for government regulation8 A decline in asset prices can lead to A worsening adverse selection and moral hazard problemsB declining uncertaintyC increased economic activityD anticipated increase in the price level9 Factors that lead to worsening conditions in financial system include A increases in net worthB unanticipated increases in the price levelC unanticipated increases in the value of the domestic currencyD unanticipated declines in the value of the domestic currency10 Factors that lead to worsening conditions in financial system include A declining interest ratesB unanticipated increases in the price levelC the deterioration in banks balance sheetsD increases in bond prices11 When there is a deterioration in financial institutions balance sheets A economic activity contracts B asset prices increaseC financial engineering takes place D financial globalization increases its pace12 Government safety nets A weaken market discipline B reduce moral hazardC incent banks to take less riskD require banks to loan less funds13 A sharp decline in the stock market means that theof corporations has fallenA net worth B interest rates C liabilitiesD payrolls14 In a bank panic A freerider increaseB bond prices increaseC transactions costs increase D multiple banks fail15 In a bank panic the source of contagion is the A freerider problemB toobigtofail problemC transactions cost problem D asymmetric information problem16 Factors that lead to worsening conditions in financial system include A increases in net worth B stock market increasesC decreases in interest rates D stock market declines17 Share prices are a valuation of a corporations A collateral B net worth C current capitalD net earnings18 A sharp decline in the stock market means that theof corporations has fallenmaking lenderswilling to lendA net worth lessB net worth more C liability lessD liability more19 Anis an increase in prices of assets above their fundamental economic values
More Less

Related notes for Economics 2154A/B

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit