Debt deflation occurs when
A) an economic downturn causes the price level to fall and a deterioration in firms' net worth because of the increased burden of indebtedness.
B) rising interest rates worsen adverse selection and moral hazard problems.
C) lenders reduce their lending due to declining stock prices (equity deflation) that lowers the value of collateral.
D) corporations pay back their loans before the scheduled maturity date.
A
You might also like to view...
________ is the total value of final goods and services produced within the borders of a country, using market prices from a specific base year to determine the value of each unit that is produced
A) Real gross domestic product B) Gross national product C) Total product D) Nominal gross domestic product A country produces only one good. It produced 5,000 units of the good during Year 1 and 6,000 units of the good in Year 2. The price of each unit of the good in Year 1 was $280 and it was $320 in Year 2. Suppose Year 1 is taken as the base year for the calculation of GDP.
At a recent company meeting, Ravi Batra, sales manager of Life's a Beach, a surfboard producer announced, "We have increased our sales by 13 percent in just 9 months
" Suppose 9 months ago, its sales amounted to $245,000, what is the value of its sales today? A) $31,850 B) $207,638 C) $276,850 D) $359,905
How does hedging affect the flow of funds in the financial system?
A) It reduces it since it is a sign that investors do not like risk. B) It reduces it because it increases risk by encouraging speculation. C) It increases it because it reduces risk thus encouraging more people to make financial investments. D) It increases it by encouraging more speculation.
The ability of capital deepening by itself to generate sustained economic growth is limited because of the law of diminishing marginal returns
a. True b. False Indicate whether the statement is true or false