A Vicious Cycle of Deleveraging Occurs When Sales of Assets

question 191

True/False

A vicious cycle of deleveraging occurs when sales of assets to cover losses produce negative balance sheet effects on other firms, causing creditors to call in their loans, which forces further sales of assets and further decreases in prices.

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Definitions:

Supply And Demand

A fundamental economic model describing how the quantity of goods supplied by producers and the quantity demanded by consumers determine the price and quantity of goods and services in a market.

Gas Tax

A government-imposed tax on the sale of gasoline, primarily used to fund transportation infrastructure projects.

Optimal Level

The most efficient, effective, or desirable point or degree for a specific purpose or condition.

Corrective Taxes

Taxes designed to encourage or discourage certain behaviors among consumers or producers, often used to correct the effects of a negative externality.