One of the Causes of the Recent Financial Crisis in the United

question 32

Essay

One of the causes of the recent financial crisis in the United States has been excessive risk taking due to underestimation of risk.How does this relate to financial leverage?
Can overestimation of risk also be detrimental?

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Definitions:

Central Executive

A component of working memory model that is responsible for directing attention and coordinating cognitive processes during complex tasks.

Chunking

Organizing items into familiar, manageable units; often occurs automatically.

Sensory Memory

The immediate, very brief recording of sensory information in the memory system.

Atkinson-Shiffrin

A model of memory proposed by Richard Atkinson and Richard Shiffrin in 1968 that describes memory in terms of three stores; sensory, short-term, and long-term memory.