A large firm that is highly interconnected with others can be a source of systemic risk, which is the possibility that an event at the firm could trigger severe instability in financial markets or the collapse of an entire industry or economy.

Question

Quizplus · Accepted Answer

A large, highly interconnected firm can indeed be a source of systemic risk because its failure or distress can have far-reaching effects on the financial system, potentially leading to widespread instability or the collapse of markets, industries, or economies due to its connections and importance.

A Large Firm That Is Highly Interconnected with Others Can