The Contagious Effect

question 13

Multiple Choice

The contagious effect:

• A)stems from the positive correlation in FI returns
• B)results when interest rate risk increases credit risk and liquidity risk exposures
• C)occurs when liquidity risk problems at bad banks damage well-run banks
• D)is completely eliminated by government provided deposit insurance against bank runs

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Definitions:

Visuospatial Sketchpad

A component of working memory that allows for the manipulation and storage of visual and spatial information.

Rehearsal Loop

A cognitive process in which information is repeated mentally to keep it in short-term memory longer.

Conceptual Hierarchy

An organized structure of concepts, ranging from the most general to the most specific, that helps in understanding and organizing knowledge.

Executive Control System

The component of the brain responsible for regulating attention, making decisions, and managing cognitive processes required for goal-directed behavior.