What Led to the Over-Extension of Credit by Some Private

question 57

Essay

What led to the over-extension of credit by some private banks and central banks in the euro zone prior to the 2009 euro crisis?

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Definitions:

Consumer Choice Behavior

Refers to the process and factors influencing the decision-making of individuals when selecting among different products or services.

Matching Law

Matching Law is a principle in psychology that states individuals allocate their responses in direct proportion to the reinforcement received from those responses.

Momentary Maximization

The tendency of an organism to choose an option that provides immediate benefits, even if a different choice could yield a higher cumulative benefit over time.

Maximizing Law

A principle suggesting that individuals behave in ways that they believe will maximize their rewards and minimize their losses.