The risk to the entire payments system due to the inability of one financial institution to fulfill its payment obligations in a timely fashion is known as ________.
A) systemic risk
B) the principal-agent problem
C) moral hazard
D) credit risk

Question

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Systemic risk refers to the risk of disruption to the entire financial system due to the failure of a single institution or a group of interconnected institutions. In this case, if one financial institution fails to fulfill its payment obligations in a timely manner, it can have a cascading effect on other institutions and the entire payments system. The principal-agent problem, moral hazard, and credit risk are different types of risks in the financial system that do not necessarily have such a broad impact.

The Risk to the Entire Payments System Due to the Inability