The solution to the recent financial crisis is
A) better financial disclosure and adequate regulatory supervision of credit markets.
B) higher borrowing costs for riskier firms.
C) higher interest rates to discourage risky borrowing.
D) expansionary fiscal policy.
E) government extending credit to consumers and firms.

Question

Quizplus · Accepted Answer

A lack of financial disclosure and inadequate regulatory supervision of credit markets played a significant role in the recent financial crisis. Therefore, improving financial disclosure and ensuring adequate regulatory supervision of credit markets is a necessary solution to avoid a similar crisis in the future. Other options such as higher borrowing costs, higher interest rates, and government extending credit, may provide temporary relief, but they do not address the underlying issues that led to the crisis. Expansionary fiscal policy may help stimulate economic growth but must be balanced with fiscal responsibility to avoid creating further economic problems.

The Solution to the Recent Financial Crisis Is