Some Form of Financial Distress Can Become a Full-Blown Recession

question 61

Multiple Choice

Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

• A)higher; increased
• B)higher; decreased
• C)lower; increased
• D)lower; decreased

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Definitions:

Escalation of Commitment

A phenomenon where people increase their investment in a decision despite new evidence suggesting it may be wrong, often due to cognitive biases or emotional attachment.

Poor Choices

Decisions made that lead to suboptimal or negative outcomes, often due to a lack of information or foresight.

Substantial Costs

Significant expenses or outlays that a company or individual may incur.

Escalation of Commitment

The tendency to continue investing in a project or decision despite evidence of its failing, driven by emotional attachment or the desire to justify prior investments.