Deflation Can Cause Widespread Bank Crises for All of the Following

question 14

Multiple Choice

Deflation can cause widespread bank crises for all of the following reasons except:

• A) a decline in the value of borrowers' net worth but not their liabilities.
• B) borrowers' default rates increase.
• C) bank balance sheets deteriorate as the level of economic activity decreases.
• D) information asymmetry problems decrease during deflationary periods.

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Definitions:

Social Identity

The portion of an individual's self-concept derived from perceived membership in a relevant social group, such as a national, religious, or occupational group.

Feigned Scarcity

A tactic wherein a sense of scarcity is artificially created to increase demand or perceived value.

Lowball Technique

A persuasion strategy where an initially favorable offer is made, then its terms are made less favorable.

Evolutionary Psychologists

Scientists who study the psychological adaptations of humans to the changing physical and social environment, particularly from an evolutionary perspective.