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© 2014 Pearson Canada Inc.$9.2 Dynamics of Financial Crises in Advanced Economies
The elimination of restrictions on financial markets and institutions is also known as
____.
A) financial engineering
B) financial lending
C) financial liberalization
D) financial deleveraging
Answer: C
Diff: 1 Type: MC Page Ref: 182
Skill: Recall
Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
crises
Financial crises ____.
A) are major disruptions in financial markets that are characterized by sharp declines in asset
prices and the failures of many financial and nonfinancial firms
B) occur when adverse selection and moral hazard problems in financial markets become less
significant
C) frequently lead to sharp expansions in economic activity
D) are a free-rider problem
Answer: A
Diff: 2 Type: MC Page Ref: 182
Skill: Recall
Objective List: 9.1 Discuss the factors that lead to financial crises
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 channelling 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
Answer: A
Diff: 3 Type: MC Page Ref: 182
Skill: Recall
Objective List: 9.1 Discuss the factors that lead to financial crises
The dark side of financial liberalization is ____.
A) market allocations
B) credit booms
C) currency appreciation
D) financial innovation
Answer: B
Diff: 1 Type: MC Page Ref: 182
Skill: Recall
Objective List: 9.1 Discuss the factors that lead to financial crises