Financial Crisis Impact Quiz
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Questions and Answers

What is the typical effect of a financial crisis on a country's financial system?

  • Increased risk of bank failures and liquidity problems (correct)
  • Improved stability and growth in the financial sector
  • Enhanced confidence in the banking system
  • Decreased need for government intervention in the financial system

    • How does a financial crisis usually impact the banking system?

  • Reduced regulatory oversight
  • Expansion of investment opportunities for banks
  • Decreased interest rates and increased lending
  • Rising non-performing loans and credit constraints (correct)

    • What is a common consequence of a financial crisis on the stock market?

  • Increased investor confidence and higher dividends
  • Stable stock prices and reduced trading activity
  • Sharp declines in stock prices and market volatility (correct)
  • Expansion of stock market indices

    • In a floating exchange rate system, a currency’s value is allowed to fluctuate compared to all other currencies. What does this mean?

    <p>Its value is determined by market forces</p> Signup and view all the answers

    What is the primary factor influencing a currency's value in a floating exchange rate system?

    <p>Interest rates in the country</p> Signup and view all the answers

    In a floating exchange rate system, how does a country intervene to stabilize its currency's value?

    <p>By buying or selling its own currency in the foreign exchange market</p> Signup and view all the answers

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