When Asset Prices Fall Following a Boom

question 10

Multiple Choice

When asset prices fall following a boom,

• A) moral hazard may increase in companies that have lost net worth in the bust.
• B) financial institutions may see the assets on their balance sheets deteriorate, leading to deleveraging.
• C) both A and B are correct.
• D) none of the above are correct.

---

Definitions:

Virtual Network

A digital network that uses software and virtualized hardware resources to provide network functionality in a virtual environment.

Expert System

A computer program that simulates the judgment and behavior of a human or an organization that has expert knowledge and experience in a particular field.

Human Thinking

The mental process involving perception, reasoning, judgment, and memory by which humans interpret and interact with the world.