A possible sequence for the three stages of a financial crisis 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

This is a common sequence for a financial crisis. Asset price declines often trigger banking crises as banks may have large exposures to those assets. Banking crises can then lead to an unanticipated decline in the price level if there is a contraction in credit and money supply.

A Possible Sequence for the Three Stages of a Financial