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:

Shareholders

Individuals or entities that own shares in a corporation, representing partial ownership.

Statement of Changes

Often refers to the statement of changes in equity or financial position, showing how equity values change over a period.

Statement of Income

A financial statement that shows a company's revenues and expenses over a specific period, resulting in a net income or net loss.

Equity

The value of ownership interest in the firm, calculated as total assets minus total liabilities.