A sudden and widespread disruption of financial institutions and markets is known as:
A)a liquidity trap.
B)the fallacy of composition.
C)a financial panic.
D)stagflation.

Question

Quizplus · Accepted Answer

A financial panic is a sudden and widespread disruption of financial institutions and markets. It typically involves a loss of confidence in the banking system and can lead to runs on banks and other financial institutions. This can lead to a credit crunch, where lending dries up, and economic activity slows. A liquidity trap is a situation where monetary policy is ineffective because interest rates are already at or near zero, and people hoard money instead of spending it. The fallacy of composition refers to the mistaken belief that what is true for an individual is also true for a group or society as a whole. Stagflation is a situation where there is both high inflation and high unemployment.

A Sudden and Widespread Disruption of Financial Institutions and Markets