During a Recession,lending Typically Declines Because

question 110

Multiple Choice

During a recession,lending typically declines because:

• A) banks need to hold less as a cushion for themselves.
• B) asset prices fall and therefore the net worth of firms declines as well,making them look riskier to banks.
• C) there are fewer collateral shocks.
• D) there is more demand for investment funding.

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Definitions:

Rival

Refers to a competitor within the same market that offers similar products or services.

Nonexcludable

A nonexcludable good or service is one where it is impossible, or highly costly, to prevent someone from benefiting from it, regardless of whether they have contributed towards it, such as public parks or national defense.

Pigouvian Tax

A tax imposed on any market activity that generates negative externalities (costs not borne by the party causing them) to correct the market outcome.

Tradable Licenses

Permits that can be bought and sold, allowing the holder to engage in a particular activity or emit a certain amount of pollutants.