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.