Analyze the article Essay Example | Topics and Well Written Essays - 500 words

Analyze the expression - Essay ExampleA drop in the stock food market has increased adverse endurance and moral hazards because it has resulted in a weakening of the market value of firms net worth, so lenders are slight eager to lend, as deficits from loans are likely to be acute. This decline in modify has then triggered enthronement and aggregate yield to decline. Also, the waning corporate net worth has increased moral hazard inducements for companies to bemuse risky investments because they now have less to lose. Again this increase in moral hazard makes lending less attractive.The failure of financial institutions in the mortgage debacle, together with the drop in the stock market has led to uncertainty in financial markets. It is more difficult to determine good from bad credit, which again has resulted to a fall in lending, investment and cumulative activity.The source of the current bank panic therefore, is crooked information. The result is that loan funds have been reduced and the price of intermediation has risen, which has caused a drop in investment and a decline in aggregate economic activity (Mishkin).