In 2006, some economists were particularly concerned that what event may increase the chance for debt deflation?
A)A collapse of the bond market
B)A collapse of housing prices
C)A collapse of the stock market
D)A collapse of the value of the dollar

Question

Quizplus · Accepted Answer

A collapse of housing prices could lead to high levels of mortgage defaults, which would increase the amount of bad debt on banks' balance sheets and reduce the value of their assets. This could trigger a chain reaction leading to deflation, as prices fall and demand shrinks, creating a vicious cycle of declining prices and economic activity.

In 2006, Some Economists Were Particularly Concerned That What Event