In addition to having a direct effect on increasing adverse selection problems,increases in interest rates also promote financial crises by ________ firms' and households' interest payments,thereby ________ their cash flow.
A)increasing; increasing
B)increasing; decreasing
C)decreasing; decreasing
D)decreasing; increasing

Question

Quizplus · Accepted Answer

Increases in interest rates lead to higher interest payments for firms and households, which decreases their cash flow, making it harder to meet financial obligations and increasing the risk of financial crises.

In Addition to Having a Direct Effect on Increasing Adverse