the economics of money, banking, and financial markets

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21. 
    

    The start of a recession or a stock market crash can result in ____.
    A) high financial regulation
    B) low interest rates
    C) low asset prices
    D) high uncertainty
    Answer: D
    Diff: 1 Type: MC Page Ref: 184
    Skill: Applied
    Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
    crises

    
    


22. 
    

    Banking crises or bank panics have started when ____.
    A) there is a reduction of the adverse selection and moral hazard problems
    B) there have been periods of low interest rates
    C) depositors withdraw their funds from banks
    D) when information is made available to investors
    Answer: C
    Diff: 1 Type: MC Page Ref: 184
    Skill: Recall
    Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
    crises

    
    


23. 
    

    If uncertainty about banks' health causes depositors to begin to withdraw their funds from
    banks, the country experiences a(n) ____.
    A) banking crisis
    B) financial recovery
    C) reduction of the adverse selection and moral hazard problems
    D) increase in information available to investors
    Answer: A
    Diff: 1 Type: MC Page Ref: 184
    Skill: Recall
    Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
    crises

    
    


24. 
    

    A sharp stock market decline increases moral hazard incentives ____.
    A) since borrowing firms have less to lose if their investments fail
    B) because it is immoral to profit from someone's loss
    C) since lenders are more willing to make loans
    D) reducing uncertainty in the economy and increasing market efficiency
    Answer: A
    Diff: 2 Type: MC Page Ref: 184
    Skill: Recall
    Objective List: 9.1 Discuss the factors that lead to financial crises