📢 Too many exams? Don’t know which one suits you best? Book Your Free Expert 👉 call Now!

  • google app store apple app store
  • ✖

      Question

      Systemic risk may arise due to

      ______
      A Market volatility Correct Answer Incorrect Answer
      B Contagion effect Correct Answer Incorrect Answer
      C High fiscal deficit Correct Answer Incorrect Answer
      D Adverse Government policies Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      Systemic risk refers to  the risk of a breakdown of an entire system rather than simply the failure of individual parts . In a financial context, it denotes the risk of a cascading failure in the financial sector, caused by linkages within the financial system, resulting in a severe economic downturn. As such, systemic risk can arise due to contagion effect i.e. the risk that financial difficulties at one or more bank(s) spill over to a large number of other banks or the financial system as a whole .

      Practice Next

      Relevant for Exams:

      ask-question