The Potential for a Financial Breakdown at One Financial Institution

question 172

Multiple Choice

The potential for a financial breakdown at one financial institution to spread throughout the financial system is known as a

• A) lending risk.
• B) moral hazard.
• C) liquidity risk.
• D) systemic risk.

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Definitions:

Elastic Supply

A situation where the quantity supplied of a good or service changes significantly in response to a change in price.

Regressive Tax

A tax system where the tax rate decreases as the taxable amount increases, placing a higher burden proportionally on lower-income earners.

Tax Schedules

Detailed tables or lists provided by tax authorities that outline the tax rates applicable to various levels of taxable income.

Taxable Income

The amount of an individual’s or corporation's income used to calculate how much tax they owe to the government, after deductions and exemptions.