An indicator of the increased lack of confidence in the banking system during the financial crisis of 2008-2009 was the:
A) increase in the federal government budget deficit.
B) decrease in interest rates.
C) increase in the TED spread.
D) decrease in the TED spread.

Question

Quizplus · Accepted Answer

The TED spread (the difference between the interbank lending rate and the yield on Treasury bills) is an indicator of perceived credit risk in the economy. During the financial crisis of 2008-2009, the TED spread increased sharply, reflecting a lack of confidence in the banking system and an increased perceived risk of default.

An Indicator of the Increased Lack of Confidence in the Banking