Systemic risk and the impact of problems that arise in financial markets upon the real economy
Systemic risk means one bank's failure can drag down the whole financial system. That collapse then damages businesses, jobs, and output in the real economy.
Real World
When Lehman Brothers collapsed in September 2008, interbank lending froze within days; UK GDP then fell by 6% over the following year as credit dried up for businesses and households.
Exam Focus
Trace the transmission chain from financial sector failure to real economy outcomes — GDP, unemployment, investment — to access the highest mark bands.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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