Most U.S. financial crises have started during periods of ________ either after the start of a recession, a stock market crash, or the failure of a major financial institution.

How would you describe the “Lemons Problem” in stock and bond markets?  

As we know, the Fed sets the required reserve ratio on checkable deposits.  Say the Fed decides to increase it.  As a result, the money multiplier will ________ and the money supply will ________.

Why does holding large amounts of bank capital helps prevent bank failures?

What can a bank do if it needs an additional $10 million to meet its reserve requirements?  

Because of their ________ liquidity, ________ U.S. government securities are called secondary reserves.

How is moral hazard reduced in debt contracts?  

Which interest rate more accurately reflects the true cost of borrowing?

If an economy experiences a financial crisis, a potential serious consequence is

Consider the risk structure of interest rates.  A decrease in marginal tax rates will ________ the demand for municipal bonds, and ________ the demand for U.S. government bonds, everything else held constant.