The Financial Crisis That Occurred in 2007 and 2008 Highlighted

question 10

Multiple Choice

The financial crisis that occurred in 2007 and 2008 highlighted one of the crucial functions of commercial banks and other financial institutions in developed economies.A crucial function that ceased to work smoothly during this time,and contributed to the global recession that began in 2008,was

• A)the acceptance of deposits from firms and households.
• B)the joint regulation of financial markets.
• C)the provision of credit to firms,households and other banks.
• D)cheque clearing and collection.
• E)the clearing of electronic transfers.

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Definitions:

MPC

Marginal propensity to consume (MPC) represents the ratio of the change in consumer spending to the change in income, showing how much income will be spent rather than saved.

APS

Average Propensity to Save; the fraction of total income that is saved by the economy or an individual at a certain time.

APC

Average Propensity to Consume, a statistical measure reflecting the percentage of income that is spent on goods and services as opposed to being saved.

Disposable Income

The amount of money a household has available for spending and saving after income taxes have been accounted for.