An Unanticipated Decline in the Price Level Increases the Burden

question 23

Multiple Choice

An unanticipated decline in the price level increases the burden of debt on borrowing firms but does not raise the real value of borrowing firms' assets.The result is

• A)that net worth in real terms declines.
• B)that adverse selection and moral hazard problems are reduced.
• C)an increase in the real net worth of the borrowing firm.
• D)an increase in lending.

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Definitions:

Suicidality

The risk or tendency towards suicide, including thoughts, plans, and attempts.

Cognitive Rigidity

The tendency to be closed to new ideas or approaches; difficulty in changing mental frameworks or strategies.

Rumination

Focusing on one’s personal concerns and feelings of distress repetitively and passively.

Perfectionism

The need to be or appear to be perfect, or even to believe that it's possible to achieve perfection.