Exam 11: Financial Crises

Mortgage brokers often did not make a strong effort to evaluate whether the borrower could pay off the loan. This created a ________.

Asset-backed commercial paper is backed by all of the following except ________.

Describe the rising phase of the leverage cycle.

Debt deflation occurs when ________.

A substantial decrease in the aggregate price level that reduces firms' net worth may stall a recovery from a recession. This process is called ________.

Most financial crises have started during periods of ________ either after the start of a recession or a stock market crash.

Describe the declining phase of the leverage cycle.

The economy recovers quickly from most recessions, but the increase in adverse selection and moral hazard problems in the credit markets caused by ________ led to the severe economic contraction known as The Great Depression.

During the ABCP saga, The Bank of Canada ________.

Which investment bank filed for bankruptcy on September 15, 2008 making it the largest bankruptcy filing in U.S. history?

A sharp decline in the stock market means that the ________ of corporations has fallen.

The dark side of financial liberalization is ________.

When regulators examine the adequacy of the financial system's liquidity it is engaging in ________ supervision.

The risk of asset-backed commercial paper depends on ________.

The recognition that increased availability of credit leading to higher asset prices and financial buffers at lending institutions and therefore further expansion of credit availability is referred to as ________.

Describe an asset-price bubble.

In a bank panic ________.

An unanticipated decline in the price level increases the burden of debt on borrowing firms but does not raise the real value of borrowing firms' assets. The result is ________.

Other than breaking systematically important financial institutions, the too-big-to-fail problem could be mitigated by requiring ________.

How can asymmetric information lead to a bank panic?