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