Financial crises may occur periodically because of which of the following?
A)the layering of financial claims
B)the inherent risks in financial intermediation
C)the fungibility of funds
D)All of the above are correct.

Question

Quizplus · Accepted Answer

All of the above are correct. The emergence of financial crises can be attributed to a variety of factors, including the layering of financial claims, which can exacerbate the effects of defaults or declines in asset values; the inherent risks of intermediation, which can result in liquidity or solvency problems for financial institutions and contagion to other segments of the financial system; and the fungibility of funds, which can lead to herding behavior and sudden shifts in market sentiment.

Financial Crises May Occur Periodically Because of Which of the Following