1. A financial crisis * A. Occurs when information flows in financial markets experience a particularly large disruption B. Occurs when house prices reach a low level C. Results in financial frictions and credit spreads increasing sharply D. "a" and "c" O E. None of the above is correct 2. Debt deflation refers to * A. an increase in net worth, leading to a relative fall in general debt levels. B. a decline in general debt levels due to deleveraging. C. a decline in bond prices as default rates rise. D. a decline in net worth as price levels fall while debt burden remains unchanged. O E. None of the Above 3. Financial innovation is:* A. New types of loans B. Other financial products OC. Technological advances O D. "a" and "b" E. All of the above 4. Credit booms happen when:* A. Financial liberalization in the short run can prompt financial institutions to go on a lending spree. B. Financial liberalization leads to credit crunching C. Stocks decline sharply D. None of the above is correct 5. Deleveraging is: * A. Increasing the value of equity B. Issuing lesser loans to borrowers by lenders C. Issuing more k o borrowers by lenders 6. Bank panic occurs when: * A. Banks issue less loans B. Banks issue more loans C. Many banks run out of business D. All of the above are correct E. None of the Above 7. Borrowers with lesser credit quality: * O A. Pay higher interest on mortgages B. Pay lesser interest on mortgages C. Do not pay interest on their loans for a period of 15 years D. All of the above are correct O E. None of the Above