3.In addition to having a direct effect on increasing adverse selection problems, increases in interest rates also promote financial crises by_____firmsʹ and householdsʹ interest payments, thereby_______their cash flow.

2.Factors likely to cause a financial crisis in emerging market countries include

1.In emerging market countries, the deterioration in bankʹs balance sheets has more ______ effects on lending and economic activity than in advanced countries.

10. When housing prices began to decline after their peak in 2006, many subprime borrowers found that their mortgages were ʺunderwater.ʺ This meant that

9. Credit market problems of adverse selection and moral hazard increased as a result of all of the following except

8. Agency problems in the subprime mortgage market included all of the following except

7. The growth of the subprime mortgage market led to

6. _______ is a process of bundling together smaller loans ( ) into standard debt securities.

5. A substantial decrease in the aggregate price level that reduces firmsʹ net worth may stall a recovery from a recession. This process is called

4. When financial intermediaries deleverage, firms cannot fund investment opportunities resulting in

3.In addition to having a direct effect on increasing adverse selection problems, increases in interest rates also promote financial crises by_____firmsʹ and householdsʹ interest payments, thereby_______their cash flow.