A sudden and widespread disruption of financial markets that occurs when people lose faith in the liquidity of financial institutions and markets is a(n):
A)asset bubble.
B)maturity transformation.
C)financial panic.
D)debt overhang.

Question

Quizplus · Accepted Answer

A sudden and widespread disruption of financial markets due to loss of faith in liquidity is known as a financial panic. An asset bubble is a situation where asset prices are driven above their fundamental value, maturity transformation is a banking process where short-term liabilities finance long-term assets, and debt overhang is a situation where a firm's existing debt reduces its investment opportunities.

A Sudden and Widespread Disruption of Financial Markets That Occurs