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Business LibreTexts

13: Financial Crises- Causes and Consequences

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    Learning Objectives

    By the end of this chapter, students should be able to:

    • Define financial crisis and differentiate between systemic and nonsystemic crises.
    • Describe a generic asset bubble.
    • Define leverage and explain its role in asset bubble formation.
    • Explain why bubbles burst, causing financial panics.
    • Define and explain the importance of lender of last resort.
    • Define and explain the importance of bailouts.
    • Narrate the causes and consequences of the financial crisis that began in 2007.

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