A Financial Crisis Occurs When an Increase in Asymmetric Information

question 5

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 channeling 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.

---

Definitions:

Mantle

The thick layer of the Earth located between the crust above and the outer core below, characterized by its solid yet plastic-like flow.

Refracted Wave

A wave that changes direction and speed as it passes from one medium to another due to differences in densities.

Material

Any substance or matter used in manufacturing, construction, or composition of something else.

Stream Channel

The physical confine of a stream (rivulet) consisting of a bed and banks, which confines and directs water flow.