Factors Causing Financial Crises
1) 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) free rider problem.
D) “lemons” problem.
2) A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system
A) causes severe adverse selection and moral hazard problems that make financial markets incapable of channeling funds efficiently.
B) allows for a more efficient use of funds.
C) increases economic activity.
D) reduces uncertainty in the economy and increases market efficiency.
3) A serious consequence of a financial crisis is
A) a contra ction in economic activity.
B) an increase in asset prices.
C) financial engineering.
D) financial globalization.