21) The process of deleveraging refers to a) Cutbacks In lending by financial in

Question

21) The process of deleveraging refers to a) Cutbacks In lending by financial institutions b) A reduction n the debt owed by banks c) Greater willingness by banks to make risky loans d) Households saving less of their income e) All of the above 22) Stage 2 of a financial crisis In an advanced economy usually involves a crisis. a) Currency b) Stock market c) Banking d) Commodities e) None of the above 23) Debt deflation refers to a) An increase in net worth, leading to a decline in relative debt levels among households and businesses b) A decline in the general debt levels due to deleveraging c) A decline in bond prices as default rates Increase d) A decline in net worth as price levels fall while debt burdens remain unchanged e) All of the above 24) 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, decreasing b) Increasing, increasing c) Decreasing, increasing d) Decreasing, decreasing e) All of the above

Explanation / Answer

21)

Deleveraging refers to reduction of debt proportion in capital structure of the companies. In macro-economic level all financial institutions must cutback the lending to companies for achieving deleveraging.

Hence, correct option is (a)

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