Systemic Risk Is

question 162

Multiple Choice

Systemic risk is:

• A) the risk of contagion that occurs when a failing financial institution owes significant sums of money to other financial institutions.
• B) a risk that is limited to a specific sector only.
• C) the risk of a bubble in the entire asset pricing system.
• D) the risk that,when a financial institution fails,its depositors will not only lose their money but also their trust in the monetary system.

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Definitions:

Government Intervention

Actions taken by a government to influence the economy beyond its basic regulations, including fiscal and monetary policies.

Classical Economists

Economists from the 18th and 19th centuries who focused on the importance of free markets, competitive forces, and the self-regulating nature of economies.

Demand

The desire and ability of consumers to purchase goods and services at given prices, influencing market equilibrium and pricing strategies.

Recessions

Periods of temporary economic decline during which trade and industrial activity are reduced, typically identified by a fall in GDP in two successive quarters.