Financial crisis lead to contraction in economic activity

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Why is a financial crisis likely to lead to a contraction in economic activity?

A. Those that borrow funds to finance productive investment opportunities will have a greater opportunity to obtain financing.

B. Disruptions in the financial system decreases asymmetric? information, thereby decreasing the associated problems of adverse selection and moral hazard.

C. A disruption in the financial system diminishes the flow of funds from savers to borrowers.

D. None of the above are correct

Reference no: EM131009782

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