Financial Crisis

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DEFINITION of 'Financial Crisis'

A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated with a panic or a run on the banks, in which investors sell off assets or withdraw money from savings accounts with the expectation that the value of those assets will drop if they remain at a financial institution.

BREAKING DOWN 'Financial Crisis'

A financial crisis can come as a result of institutions or assets being overvalued, and can be exacerbated by investor behavior. A rapid string of sell offs can further result in lower asset prices or more savings withdrawals. If left unchecked, the crisis can cause the economy to go into a recession or depression.

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RELATED FAQS
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    Austerity policies are intended to reduce government debt and bring stability to that nation's economy. Austerity's effectiveness ... Read Full Answer >>
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    The financial crisis had a negative impact on the oil and gas sector as it led to a steep decline in oil and gas prices and ... Read Full Answer >>
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  4. How is market to market accounting different than historical cost accounting?

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