Key Terms

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.

Question

Maturity transformation
Shadow bank
Banking crisis
Asset bubble
Financial contagion
Financial panic
Credit crunch
Debt overhang
Liquidity trap
Lender of last resort
the price of an asset pushed to an unreasonably high level because of expectations of further price gains
a nondepository financial institution that engages in maturity transformation.
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.
an episode in which a large part of the depository banking sector or the shadow banking sector fails or threatens to fail
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
high debt but diminished assets, resulting from a vicious circle of deleveraging
the conversion of shortterm liabilities into long-term assets
a reduction in the availability of credit in which potential borrowers can’t get credit at all or must pay very high interest rates
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 sudden and widespread disruption of the financial markets that occurs when people suddenly lose faith in the liquidity of financial institutions and markets

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

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