Stage Three of a financial crisis in an advanced economy features
A) a general increase in inflation.
B) debt deflation.
C) an increase in general price levels.
D) a full-fledged financial crisis.

Question

Quizplus · Accepted Answer

Stage Three of a financial crisis in an advanced economy features debt deflation, which means a decrease in prices due to a decrease in the supply of money or credit. This can lead to a vicious cycle of increasing defaults, bankruptcies, and a further decrease in demand and prices, ultimately leading to a recession or depression. Options A and C are describing inflation, which is not a characteristic of Stage Three. Option D is too broad and can occur in any stage of a financial crisis.

Stage Three of a Financial Crisis in an Advanced Economy