The First Three Elements of a Financial Crisis Are Correctly $\rarr$

question 118

Multiple Choice

The first three elements of a financial crisis are correctly represented as taking place in the following order:

• A)large decline in some asset prices \(\rarr\) insolvencies at financial institutions \(\rarr\)decline in confidence in financial institutions
• B)insolvencies at financial institutions \(\rarr\)decline in confidence in financial institutions \(\rarr\)large decline in some asset prices
• C)insolvencies at financial institutions \(\rarr\)economic downturn \(\rarr\)credit crunch
• D)insolvencies at financial institutions \(\rarr\)credit crunch \(\rarr\)economic downturn

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Definitions:

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The fundamental equation representing the relationship between assets, liabilities, and equity (Assets = Liabilities + Equity) in accounting.

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A financial instrument in which one party promises in writing to pay a determinate sum of money to the other.

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