In the period since the financial crisis of 2007-2009, inflation has been low in many countries,...

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In the period since the financial crisis of 2007-2009, inflationhas been low in many countries, while a few experienced outrightdeflation. Why might unexpected deflation be of particular concernto someone managing a bank? Unexpected deflation is associated with____ of borrowers, as the nominal value of their assets _but the dollar amount of their liabilities _ . This weakenscreditworthiness and can lead to lending as asymmetricinformation problems worsen. In turn, credit supply candiminish economic activity, leading to _____ defaults, adeterioration in the quality of the bank’s balance sheet andultimately to bank insolvency.

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Your sentence should read as follows Unexpected deflation is associated with falling net worth of borrowers as the nominal value of their assets falls but the dollar amount of See Answer

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In the period since the financial crisis of 2007-2009, inflationhas been low in many countries, while a few experienced outrightdeflation. Why might unexpected deflation be of particular concernto someone managing a bank? Unexpected deflation is associated with________ of borrowers, as the nominal value of their assets _______but the dollar amount of their liabilities _______ . This weakenscreditworthiness and can lead to ________ lending as asymmetricinformation problems worsen. In turn, ________ credit supply candiminish economic activity, leading to _________ defaults, adeterioration in the quality of the bank’s balance sheet andultimately to bank insolvency.