Which Sequence of Events Correctly and Sequentially Best Describes Financial

question 1

Multiple Choice

Which sequence of events correctly and sequentially best describes financial sector problems spilling over to the real sector of the economy?

• A)Bank assets increase,capital increases,consumers purchase less,firms lay-off workers.
• B)Bank liabilities increase,capital decreases,consumers purchase more of the "wrong" products,firms lay-off some workers and hire other workers.
• C)Bank assets decline in value,banks approach insolvency,banks cut back on lending,consumers purchase less,some firms produce less and other firms go out of business.
• D)Banks engage in regulatory capital arbitrage,leverage ratios are rising,asset values are rising,consumers purchase less,producers produce less,firms lay-off some workers.
• E)none of the above

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Definitions:

Sensory Adaptation

The process by which sensory receptors change their sensitivity to a stimulus over time, often leading to diminished sensitivity to a constant stimulus.

Perceptual Invariance

The cognitive ability to recognize objects as being the same under different conditions, such as changes in lighting, angle, or context.

Perceptual Assimilation

The process by which new information is interpreted and integrated into existing cognitive schemas.

Just Noticeable Differences

The smallest difference in stimulation that can be reliably detected by an observer, essentially the threshold at which a change in sensory input is perceptible.