Which of the following occurs during a default crisis?
A) Banks close or declare bankruptcy.
B) A government is unable to pay principal or interest on debt owed to banks.
C) No one wants to borrow from banks.
D) A country's central bank runs out of reserve currencies.

Question

Quizplus · Accepted Answer

During a default crisis, a government is unable to pay principal or interest on debt owed to banks. This can lead to a loss of confidence in the country's ability to repay its debts, causing lenders to demand higher interest rates or refuse to lend altogether. This can result in a financial and economic crisis for the country, potentially leading to bank failures and bankruptcy. The other options listed may be related to a financial crisis but are not specifically related to a default crisis.

Which of the Following Occurs During a Default Crisis