25. Equity contracts

a. Are agreements by the borrowers to pay the lenders fixed dollar amounts at periodic intervals

b. Have advantage over debt contracts of a lower cost of state verification.

c. Are used much more frequently to raise capital than are debt contracts

d. Are non of the above

26. Factors that lead to worsening conditions in financial markets include

a. Declining interest rates

b. Declining stock prices

c. Unanticipated increases in the price level

d. Only (a) and (c) of the above

e. only (b) and (c) of the above

29. Equity contracts are subject to a particular example of --------- called the -------- problem

a. Adverse selection; principal agent

b. Moral hazard , principal agent

c. Adverse selection; free rider

d. Moral hazard; free rider

30. Debt-deflation occurs when the price level ----------- , reducing the value of business firms -----

a. Rises; net worth

b. Rises; collateral

c. Falls; net worth

d. Falls; collateral

31. Important factors leading up to the financial crisis in both Mexico and East Asia in the mid to late 1990s include

a. Weak supervision of banks by regulators

b. Lack of expertise in screening and monitoring borrowers at banking institutions

c. An increase in indebtedness due to depreciation of their currencies

d. All of the above

e. only (a) and (b) of the above