Any event that changes any of the determinants of YN will shift the LRAS.

Collateral requirements lessen the consequences of ________ because the collateral reduces the lender's losses in the case of a loan default and it reduces ________ because the borrower has more to lose from a default

A) adverse selection; moral hazard B) moral hazard; adverse selection C) adverse selection; diversification D) diversification; moral hazard

Suppose a large country experiences economic growth which results in a reduced willingness to trade. The country's terms of trade will ________ because the fall in demand for imports will cause the price of its exports to ________ relative to the price that it has to pay for its imports.

A. worsen; rise B. improve; rise C. worsen; fall D. improve; fall