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

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.

2.A bank panic can lead to a severe contraction in economic activity due to

1.A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system

10. Financial innovation has caused

9. Money market mutual funds

8. Newly-issued high-yield bonds rated below investment grade by the bond-rating agencies are frequently referred to as

7. Automated teller machines

6. An instrument developed to help investors and institutions hedge interest -rate risk is