Some form of financial distress can become a full-blown recession if risk lead to ____ interest rates and ____ aggregate demand.

Question

Quizplus · Accepted Answer

If risk leads to higher interest rates, borrowing becomes more expensive and therefore, consumption and investment decrease. This leads to a decreased aggregate demand, which exacerbates the financial distress, potentially leading to a recession.

Some Form of Financial Distress Can Become a Full-Blown Recession