The Problem of Debt Deflation Deepens During an Economic Slump

question 60

Multiple Choice

The problem of debt deflation deepens during an economic slump because:

• A) borrowers have to reduce spending to pay off debts.
• B) the Fisher effect raises the nominal interest rate during deflation.
• C) lenders have to reduce spending to accommodate higher returns from loans.
• D) the zero bound on the nominal interest rate is broken.

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Definitions:

Alleles

Alternate forms of a single gene.

Primates

An order of mammals that includes humans, monkeys, and apes, characterized by large brains, forward-facing eyes, and dexterous hands.

Meiosis

A kind of cell division that produces the sex cells, each of which has half the number of chromosomes found in other cells of the organism.