The Financial Instability Hypothesis Attempts to Explain

question 11

Multiple Choice

The financial instability hypothesis attempts to explain

• A)why a period of prosperity may lead to an eventual collapse.
• B)how the mixture of hedge, speculative, and Ponzi spending units determines the overall health of the economy.
• C)why there is a natural tendency for the economy to experience long term boom-crisis cycles.
• D)All of the above are correct.

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Definitions:

Current Liabilities

Liabilities of a company that need to be settled within a year.

Total Liabilities

The combined debts and financial obligations a company owes to outside parties, recorded on the balance sheet.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, showing the balance of income and expenditure over the preceding period.

Correcting Entry

A journal entry made in accounting records to amend a previously recorded error.