How does a financial crisis occur?

 

What are the reasons for the financial crisis in 2007-2008?

 

How can economies of scale help explain the existence of financial intermediaries?

 

Rich people often worry that others will seek to marry them only for their money. Is this a problem of adverse selection?

 

Would moral hazard and adverse selection still arise in financial markets if the information were not asymmetric? Explain.

 

How does the free-rider problem aggravate adverse selection and moral hazard problems in financial markets?

 

Which firms are most likely to use bank financing rather than to issue bonds or stocks to finance their activities? Why?

 

“The more collateral there is backing a loan, the less the lender has to worry about adverse selection.” Is this statement true, false, or uncertain? Explain your answer.

Answer rating: 100% (QA)

1 A financial crisis occurs when one or more financial markets or intermediaries cease functioning or function only erratically and inefficiently A crisis can occur if institutions or assets are overv... View the full answer