Falling House Prices Can Generate Widespread Insolvency of Financial Institutions

question 24

Multiple Choice

Falling house prices can generate widespread insolvency of financial institutions by:

• A)reducing the value of collateral assets.
• B)reducing the value of liabilities.
• C)increasing the value of assets.
• D)increasing capital.

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Definitions:

Consequential Damages

Losses that do not flow directly from an act but only from some of the consequences or results of the act.

Lost Profits

Potential earnings that a business did not realize due to a breach of contract, negligence, or other wrongful acts.

Unconscionable

Referring to an agreement or action that is excessively unfair or unjust, often to the degree that it is deemed unenforceable in a court of law.

Resell

The act of selling a product or service that one has bought to another buyer.