The economics of money, chapter 9 Financial institutions.

QUESTIONS AND PROBLEMS all questions and problems are available in Pavecondo amammyeconlab.com/mishkin. 1. How can a bursting of an asset-price bubble in the stock market help trigger a financial crisis? How does an unanticipated decline in the price level cause a drop in lending? 3. When can a decline in the value of a country's currency exacerbate adverse selection and moral hazard prob- lems? Why? 4 . How can a decline in real estate prices cause deleverag- ing and a decline in lending? 5. How does a deterioration in balance sheets of financial institutions and the simultaneous failures of these insti- tutions cause a decline in economic activity? 6. How does a general increase in uncertainty as a result of a failure of a major financial institution lead to an increase in adverse selection and moral hazard prob- lems? What are the two ways that spikes in interest rates lead to an increase in adverse selection and moral hazard problems? How can government fiscal imbalances lead to a finan cial crisis? How can financial liberalizations lead to financial crises