Match each of the terms on the left with its definition on the right. Click on the term first and then click on the matching definition. As you match them correctly they will move to the bottom of the activity.
Maturity transformation Shadow bank Banking crisis Asset bubble Financial contagion Financial panic Credit crunch Debt overhang Liquidity trap Lender of last resort | the economy is in a liquidity trap when monetary policy is ineffective because nominal interest rates are up against the zero bound for interest rates. a nondepository financial institution that engages in maturity transformation. a sudden and widespread disruption of the financial markets that occurs when people suddenly lose faith in the liquidity of financial institutions and markets high debt but diminished assets, resulting from a vicious circle of deleveraging an episode in which a large part of the depository banking sector or the shadow banking sector fails or threatens to fail a reduction in the availability of credit in which potential borrowers can’t get credit at all or must pay very high interest rates the conversion of shortterm liabilities into long-term assets the price of an asset pushed to an unreasonably high level because of expectations of further price gains an institution, usually a country’s central bank, that provides funds to financial institutions when they are unable to borrow from private credit markets a vicious downward spiral among depository banks or shadow banks: each bank’s failure worsens fears and increases the likelihood that another bank will fail |
Maturity transformation, p. 546
Shadow bank, p. 546
Banking crisis, p. 548
Asset bubble, p. 548
Financial contagion, p. 549
Financial panic, p. 549
Credit crunch, p. 554
Debt overhang, p. 554
Liquidity trap, p. 555
Lender of last resort, p. 555