Debt Deflation Occurs When

question 33

Multiple Choice

Debt deflation occurs when

• A)an economic downturn causes the price level to fall and a deterioration in firms' net worth because of the increased burden of indebtedness.
• B)rising interest rates worsen adverse selection and moral hazard problems.
• C)lenders reduce their lending due to declining stock prices (equity deflation)that lowers the value of collateral.
• D)corporations pay back their loans before the scheduled maturity date.

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