The recent financial crises was exacerbated by
A) managers who overestimated risk and hence did not invest sufficient funds.
B) managers who underestimated the real risks of their decisions and borrowed excessively.
C) a lack of financial leverage that made U.S. firms less competitive in world markets.
D) extremely high interest rates in the United States that stifled investment.

Question

Quizplus · Accepted Answer

The recent financial crisis was primarily caused by managers who underestimated the real risks of their decisions and borrowed excessively. This resulted in a buildup of risky assets and overly leveraged positions, leading to a market collapse. Other factors such as a lack of financial leverage and high interest rates may have played a role, but they were not the primary cause of the crisis.

The Recent Financial Crises Was Exacerbated by