Collateral shocks make borrowing and lending more difficult and help to exacerbate economic fluctuations.

Question

Quizplus · Accepted Answer

Collateral shocks refer to unexpected events that adversely affect the value of collateral assets used in borrowing and lending. These shocks make it more difficult for borrowers to obtain loans and for lenders to provide them, which can worsen economic fluctuations. Therefore, the statement is true.

Collateral Shocks Make Borrowing and Lending More Difficult and Help