Factors that can lead to worsening conditions in financial markets include increasing interest rates and asset price booms.

Question

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When interest rates increase, borrowing costs increase, which can lead to a decrease in consumer and business spending. In turn, this can lead to a decrease in profits and stock prices. Asset price booms, such as in the housing market, can create a bubble that eventually bursts, leading to significant declines in asset values and a ripple effect throughout financial markets.

Factors That Can Lead to Worsening Conditions in Financial Markets