In the early stages of the banking crisis in the 1980s,financial institutions were especially hurt by

Question

Quizplus · Accepted Answer

The early 1980s banking crisis was significantly impacted by sharp increases in interest rates from late 1979 until 1981 and the severe recession in 1981-82. High interest rates increased the cost of borrowing, leading to defaults on loans, while the recession reduced economic activity, further hurting financial institutions. The price level did not sharply decline during this period; instead, the period was marked by high inflation, making option C incorrect.

In the Early Stages of the Banking Crisis in the 1980s,financial