Collateral shocks make borrowing:
A) more difficult.
B) less difficult.
C) neither more or less difficult.
D) less expensive.

Question

Quizplus · Accepted Answer

Collateral shocks refer to sudden and unexpected changes in the value of assets used as collateral for borrowing. These shocks increase the risk and uncertainty associated with lending, making lenders more cautious and selective when considering loan applications. As a result, borrowing becomes more difficult since lenders may require more collateral, higher interest rates or even reject loan applications altogether.

Collateral Shocks Make Borrowing