If Debt Contracts Are of Fairly Long Maturity, Then an Unanticipated

question 47

Multiple Choice

If debt contracts are of fairly long maturity, then an unanticipated decline in the aggregate price level results in ________.

• A) a decline in a firm's net worth
• B) an increase in a firm's net worth
• C) a decrease in adverse selection and moral hazard
• D) an increase in willingness to lend

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Definitions:

Capital Market

A financial market in which longer-term (at least one year) debt and equity securities are traded.

Securities And Exchange Commission

A U.S. government agency responsible for enforcing the laws governing the securities industry, including the stock and options exchanges.

Insider Trading Laws

Regulations that prohibit trading a public company's stock or other securities by individuals with access to non-public information.

Supervising

The act of overseeing and directing the work and performance of others, ensuring tasks are completed efficiently and effectively.