What is a financial crisis?
a) A period of sustained economic growth
b) A situation where financial institutions or assets lose significant value
c) A government policy to increase taxes
d) A rise in employment and investment
Which of the following is a common cause of financial crises?
a) Low inflation rates
b) Excessive risk-taking by financial institutions
c) Strict banking regulations
d) Government budget surpluses
What was a major cause of the 2008 Global Financial Crisis?
a) High oil prices
b) The collapse of the housing market and subprime mortgage lending
c) Increased government spending
d) A decrease in technology investments
Which institution typically steps in to stabilize financial crises?
a) The World Health Organization
b) The central bank (e.g., Federal Reserve, European Central Bank)
c) The Department of Education
d) The International Olympic Committee
What is a “bank run”?
a) A marathon sponsored by a bank
b) A rapid withdrawal of deposits from banks due to panic
c) A government bailout of failing banks
d) An increase in loan approvals by banks
Which economic factor is most likely to trigger a financial crisis?
a) Steady GDP growth
b) High levels of private and public debt
c) Low unemployment rates
d) Increased foreign direct investment
How do financial bubbles contribute to economic crises?
a) They create long-term economic stability
b) They lead to overvalued assets that eventually collapse
c) They encourage responsible investing
d) They increase savings rates among households
What role does investor confidence play in financial crises?
a) It has no effect on financial stability
b) A lack of confidence can lead to market crashes
c) It prevents economic downturns
d) It ensures that financial institutions never fail
Which of the following best describes a “liquidity crisis”?
a) A shortage of physical currency in circulation
b) A situation where financial institutions lack the cash to meet short-term obligations
c) A period of low stock market volatility
d) An increase in tax revenues for the government
How does excessive speculation contribute to financial crises?
a) It stabilizes financial markets
b) It creates asset bubbles that eventually burst
c) It reduces financial risk in the economy
d) It ensures sustainable long-term growth
Which of the following contributed to the Great Depression of 1929?
a) A rise in government employment
b) The collapse of the stock market and banking failures
c) Increased consumer spending
d) A major technological breakthrough
Which financial institution is often blamed for failing to prevent financial crises?
a) Hospitals
b) Central banks and regulatory agencies
c) Non-profit organizations
d) Movie production companies
What is a key sign of an impending financial crisis?
a) Rising levels of corporate and household debt
b) Declining employment rates
c) A rise in government savings
d) Increased stability in the stock market
What is the term for financial institutions that are “too big to fail”?
a) Small businesses
b) Systemically important financial institutions
c) Privately owned banks
d) Government-sponsored enterprises
Which of the following can help prevent financial crises?
a) Weak financial regulations
b) Strong banking supervision and risk management
c) Unlimited lending to unqualified borrowers
d) Lack of transparency in financial transactions
Which financial crisis led to the creation of the International Monetary Fund (IMF)?
a) The 2008 Financial Crisis
b) The Great Depression of 1929
c) The Latin American Debt Crisis
d) The 1944 Bretton Woods Agreement following World War II
What is the impact of financial crises on employment?
a) They generally lead to increased job creation
b) They cause higher unemployment and job losses
c) They have no effect on the job market
d) They reduce wage inequality
What is the primary role of a government during a financial crisis?
a) To remain uninvolved and let markets recover naturally
b) To implement policies such as bailouts, stimulus packages, or interest rate cuts
c) To increase financial speculation
d) To eliminate the banking sector
Which of the following is a common effect of financial crises?
a) Increased wealth distribution
b) Economic recessions and market instability
c) Reduced government intervention
d) Higher investment in luxury goods
What happens to consumer spending during a financial crisis?
a) It increases significantly
b) It decreases as people save more due to uncertainty
c) It remains stable
d) It is unaffected by economic downturns
