Passage
The 1929 stock market crash in the United States, also known as the Great Crash, affected virtually every American who had a stake in the financial market. In its wake, a deep economic crisis creating political and social unrest caused the United States government to create a strict financial regulatory system that worked effectively from the 1930s through the 1960s.In the late 1930s, as experts clamored to unravel the source of this financial disaster, British economist John Maynard Keynes organized a dynamic revolution in neoclassical macroeconomics, purporting that free markets could ultimately lead to more adequate employment, rather than the normative "boom and bust" cycle of fiscal recessions and depressions in the United States. However, Keynes also supported government interference, contending that a reduction in consumer spending due to economic hardship must be adequately supplemented by government expenditure. The American economics professor Hyman Minsky joined the Keynesian cause two decades later, adding that an accumulation of debt by the national government drives an unstable economy toward crisis, especially in the nongovernment sector.Preceding the Great Crash, the financial market was already unstable, which in hindsight has proven to be one of the many warning signs for emerging crises. Regrettably, these "red flags" were not characterized until after the collapse. To prevent another crash as experienced in 1929 and, to a lesser extent in 2008, changes must be made as financial markets expand and become more intricate. Many economists agree that the mainstream theory of financial markets, which is the foundation of support for the archaic New Financial Architecture (NFA), must be replaced by the realistic economic theories proposed by Keynes and Minsky. In opposition to singular market ownership, Keynesian economics points to a macroeconomic system wherein a "mixed economy" places the bulk of financial responsibility on households, to be supplemented by governmental spending when necessary. However, NFA regulations tout the practice of "business as usual," allowing the market to cycle in and out of recessions.Progress has been made toward overall reform, however slowly. A January 2009 report from the Comptroller General's Office to the United States Congress was delivered in hopes of shaping potential regulatory reform efforts. These efforts "seek to: 1) describe how regulation has evolved in banking, securities, thrifts, credit unions, futures, insurance, secondary mortgage markets and other important areas; (2) define several key changes in the financial sector in recent decades that have highlighted significant limitations and gaps in the existing regulatory system; and (3) present an evaluation framework that can be used by Congress and others to restructure regulatory reform."Also, there must be a broad political mandate in support of serious financial regulatory reforms. For too long, monetary elites such as lobbyists, private bankers, and commercial investors have controlled a potentially fragile financial system. Regulation is needed for remedying market failure and protecting the economy from an imminent collapse.These conjectures are meant to replace fragmented and complex arrangements of federal and state regulations-put into place over the past 150 years-that have not kept pace with major developments in financial markets and commercial products in recent decades. Without safeguards in place, the American financial market will face a continuous ebb and flow of prosperity and may be forced to face another crisis.
-Based on the passage, it is reasonable to conclude that the current financial market is significantly affected by the:

Question

Passage
The 1929 stock market crash in the United States, also known as the Great Crash, affected virtually every American who had a stake in the financial market.  In its wake, a deep economic crisis creating political and social unrest caused the United States government to create a strict financial regulatory system that worked effectively from the 1930s through the 1960s.In the late 1930s, as experts clamored to unravel the source of this financial disaster, British economist John Maynard Keynes organized a dynamic revolution in neoclassical macroeconomics, purporting that free markets could ultimately lead to more adequate employment, rather than the normative "boom and bust" cycle of fiscal recessions and depressions in the United States.  However, Keynes also supported government interference, contending that a reduction in consumer spending due to economic hardship must be adequately supplemented by government expenditure.  The American economics professor Hyman Minsky joined the Keynesian cause two decades later, adding that an accumulation of debt by the national government drives an unstable economy toward crisis, especially in the nongovernment sector.Preceding the Great Crash, the financial market was already unstable, which in hindsight has proven to be one of the many warning signs for emerging crises.  Regrettably, these "red flags" were not characterized until after the collapse.  To prevent another crash as experienced in 1929 and, to a lesser extent in 2008, changes must be made as financial markets expand and become more intricate.  Many economists agree that the mainstream theory of financial markets, which is the foundation of support for the archaic New Financial Architecture (NFA), must be replaced by the realistic economic theories proposed by Keynes and Minsky.  In opposition to singular market ownership, Keynesian economics points to a macroeconomic system wherein a "mixed economy" places the bulk of financial responsibility on households, to be supplemented by governmental spending when necessary.  However, NFA regulations tout the practice of "business as usual," allowing the market to cycle in and out of recessions.Progress has been made toward overall reform, however slowly.  A January 2009 report from the Comptroller General's Office to the United States Congress was delivered in hopes of shaping potential regulatory reform efforts.  These efforts "seek to: 1) describe how regulation has evolved in banking, securities, thrifts, credit unions, futures, insurance, secondary mortgage markets and other important areas; (2) define several key changes in the financial sector in recent decades that have highlighted significant limitations and gaps in the existing regulatory system; and (3) present an evaluation framework that can be used by Congress and others to restructure regulatory reform."Also, there must be a broad political mandate in support of serious financial regulatory reforms.  For too long, monetary elites such as lobbyists, private bankers, and commercial investors have controlled a potentially fragile financial system.  Regulation is needed for remedying market failure and protecting the economy from an imminent collapse.These conjectures are meant to replace fragmented and complex arrangements of federal and state regulations-put into place over the past 150 years-that have not kept pace with major developments in financial markets and commercial products in recent decades.  Without safeguards in place, the American financial market will face a continuous ebb and flow of prosperity and may be forced to face another crisis.
-Based on the passage, it is reasonable to conclude that the current financial market is significantly affected by the:

Quizplus · Accepted Answer

In this scenario, the goal is to identify which factor has a significant effect on the current financial market. Paragraph 6 explains that the issue with current "fragmented and complex arrangements of federal and state regulations" is that these have not kept up with "major developments in financial markets and commercial products in recent decades." Therefore, it is reasonable to conclude that these past major changes have had a significant impact on the current financial sector. (Choice A) Although a January 2009 report was delivered to Congress, as evidenced in Paragraph 4, there is no mention of how the report was received or responded to, if at all. Consequently, it cannot be assumed that there was a congressional response that affected the current market. (Choice B) Paragraph 6 does state that there have been major developments in financial products, but no information is given about the volume of products available or how this affects the financial market. (Choice D) The first point in Paragraph 4 describes "how regulation has evolved in banking…insurance…and other important areas," but there is no mention of any innovatory (new) changes related to these issues that would affect the current financial market.