In a severe banking crisis:
A)very few banks in the system actually go into bankruptcy.
B)government intervention usually is not required, since the market outcome is always preferable to one that results from government intervention.
C)the economy usually falls into a severe recession followed by a slow recovery.
D)economic growth usually resumes quickly after the crisis is resolved.

Question

Quizplus · Accepted Answer

In a severe banking crisis, the economy usually falls into a severe recession followed by a slow recovery. This is because the crisis typically affects consumer and business confidence, credit availability, and economic activity, leading to lower production, employment, and investment. As a result, it often takes time for the economy to recover from the shock and rebuild its financial system. Government intervention may be required to stabilize the situation, restore confidence, and provide liquidity to the system. Therefore, choice C is the best one.

In a Severe Banking Crisis