In 2007, fears that losses would push banks into insolvency caused a(n) , as banks _.
A)liquidity crisis; became reluctant to loan to each other
B)inflationary spiral; inter-bank real interest rates became negative
C)bank panic; closed their doors to depositors
D)asset-price crash; ceased buying each other's assets

Question

Quizplus · Accepted Answer

The statement mentions fears of insolvency and reluctance to loan to each other, which are signs of a liquidity crisis.

In 2007, Fears That Losses Would Push Banks into Insolvency