Systemic Risk Exists Because

question 2

Multiple Choice

Systemic risk exists because

• A)there is no government regulation of financial markets.
• B)financial institutions invest in similar securities and therefore are similarly exposed to large declines in prices of those securities.
• C)financial institutions borrow using long-term debt securities but lend their funds for short-term periods.
• D)financial institutions invest heavily in Treasury securities and therefore are exposed to the possibility that the government will default on its debts.

---

Definitions:

Point Price Elasticity

A measure of how the quantity demanded of a good responds to a change in the price of that good, calculated at a specific point on the demand curve.

Quarterly Demand

The total quantity of a good or service that consumers are willing and able to purchase at a given price over the span of three months.

Per Capita Consumption

Measures the average amount of a good or service consumed per person within a population over a specific period.

Consumer Surplus

The discrepancy between the sum consumers intend to pay for a product or service and the sum they really pay.