A Financial Crisis Occurs When an Increase in Asymmetric Information

question 45

Multiple Choice

A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system ________.

• A) causes severe adverse selection and moral hazard problems that make financial markets incapable of channelling funds efficiently
• B) allows for a more efficient use of funds
• C) increases economic activity
• D) reduces uncertainty in the economy and increases market efficiency

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Definitions:

Semilunar Valves

Heart valves located at the bases of the aorta and the pulmonary artery that prevent blood from flowing back into the ventricles.

Ventricular Pressure

The pressure within the heart's ventricles during the cardiac cycle, crucial for pumping blood throughout the body.

Atrial Pressure

The pressure within the atria of the heart, indicating the volume of blood returning to the heart and influencing heart function.

Ejection

The process of driving or pushing something out.