In Addition to Having a Direct Effect on Increasing Adverse

question 30

Multiple Choice

In addition to having a direct effect on increasing adverse selection problems,increases in interest rates also promote financial crises by ________ firms' and households' interest payments,thereby ________ their cash flow.

• A) increasing; increasing
• B) increasing; decreasing
• C) decreasing; increasing
• D) decreasing; decreasing

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Definitions:

Utility

A measure of the satisfaction or pleasure that individuals get from the consumption of goods and services.

Budget Line

A diagram illustrating every potential mix of two commodities that are affordable within a specific budget, considering their set prices.

Money Income

The total amount of monetary earnings received by an individual or household, including wages, salaries, bonuses, and other income sources before taxes.

Budget Line

A graphical representation of all possible combinations of two goods that a consumer can afford at given prices within his or her budget.