Question

What would likely have the most severe immediate effect on an economy? Multiple Choice A significant drop in exports. The Fed's infusing reserves into the economy. An aggregate demand shock. A failure of the financial sector.

Answer 1

A failure of the financial sector.

Step-by-step explanation:

Financial sector indicates all banks and non-banking institutions. These sectors are the source of money supply in an economy. If this sector fails to do such work, the economy might face severe money crisis and the effect would be immediate. An example of it is 2007-08 depression in the US economy.