A possible sequence for the three stages of a financial crisis in Canada might be ________ leads to ________ leads to ________.
A) asset price declines; banking crises; unanticipated decline in price level
B) unanticipated decline in price level; banking crises; increase in interest rates
C) banking crises; increase in interest rates; unanticipated decline in price level
D) banking crises; increase in uncertainty; increase in interest rates

Question

Quizplus · Accepted Answer

The first stage of a financial crisis in Canada would likely involve a decline in asset prices, such as housing or stock prices. This could then lead to banking crises, as these institutions may have made loans based on the value of those assets. Finally, an unanticipated decline in the price level could occur, causing further economic trouble.

A Possible Sequence for the Three Stages of a Financial