A _____ refers to a loss of confidence in the banking system that leads to a run on banks as individuals and companies withdraw their deposits.
A) currency crisis
B) banking crisis
C) foreign debt crisis
D) domestic debt crisis

Question

Quizplus · Accepted Answer

A currency crisis occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate. In contrast, a banking crisis refers to a loss of confidence in the banking system that leads to a run on banks as individuals and companies withdraw their deposits. Finally, a foreign debt crisis is a situation in which a country cannot service its foreign debt obligations, whether private sector or government debt.These crises tend to have common underlying macroeconomic causes: high relative price inflation rates, a widening current account deficit, excessive expansion of domestic borrowing, and asset price inflation (such as sharp increases in stock and property prices).

A _____ Refers to a Loss of Confidence in the Banking