What was the double liquidity shock that occurred in the US financial system in the summer of 2007?
What will be an ideal response?
Investors began to doubt the value of a wide class of securities so market liquidity for those instruments disappeared and financial institutions that held them faced large losses. In turn, funding liquidity for these institutions dried up as the potential losses caused their lenders to be worried about their safety.
You might also like to view...
Banks may borrow from or lend to another bank in the Federal Funds market. A loan of excess reserves from one bank to another bank is recorded as a(n) ________ for the borrowing bank and a(n) ________ for the lending bank
A) asset; asset B) asset; liability C) liability; liability D) liability; asset
A increase in net exports
a. shifts the aggregate demand schedule upward b. shifts the aggregate demand schedule downward. c. does not shift the aggregate demand schedule. d. decreases saving.
The reason why inflation reduces the value of the multiplier is that part of the change in demand is
a. absorbed by price changes. b. saved rather than spent. c. matched by changes in supply. d. matched by changes in income.
Fundamental analysis shows that stock in Stainless Appliance Company has a present value below its price
a. This stock is overvalued; you should consider adding it to your portfolio. b. This stock is overvalued; you shouldn't consider adding it to your portfolio. c. This stock is undervalued; you should consider adding it to your portfolio. d. This stock is undervalued; you shouldn't consider adding it to your portfolio.