________ refers to a decrease in the willingness of banks to lend,while an impairment of the ability of nonfinancial firms to borrow is a consequence of ________.

Question

Quizplus · Accepted Answer

Deleveraging refers to a decrease in the willingness of banks to lend, while debt deflation refers to a decrease in the ability of nonfinancial firms to borrow due to falling asset prices, increasing real debt burdens, and decreasing cash flows. Adverse selection refers to a situation where one party possesses more information about a transaction than the other, moral hazard refers to the incentive to take risks that one is not fully responsible for, fire sales refer to the sudden liquidation of assets due to a fall in their value, a bank panic refers to a situation where depositors start to withdraw their money from banks out of fear of bank insolvency, the shadow banking system refers to financial intermediaries that perform bank-like functions but are not subject to the same regulatory oversight, and agency theory refers to the conflict of interest that arises when one person or entity (the principal) hires another person or entity (the agent) to act on their behalf.

________ Refers to a Decrease in the Willingness of Banks