The potential problem faced by the rest of Europe in the event of a Greek debt default is:
A) the inability of the European Central Bank to conduct open market operations.
B) the risk of banks holding Greek debt becoming insolvent.
C) an increase in the number of U.S. dollars traded per euro in the foreign exchange market.
D) the strain on the European banking system, while banks in the rest of the world would be unaffected.

Question

Quizplus · Accepted Answer

If Greece were to default on its debt, the banks that hold its debt would become insolvent, causing a ripple effect throughout the European banking system. This could potentially lead to a wider financial crisis across Europe.

The Potential Problem Faced by the Rest of Europe in the Event