Question

What activities can lead to defaults on the part of speculators and creditors?

A. Speculators and creditors cannot experience defaults
B. Defaults can occur due to sound financial management by speculators and creditors
C. Engaging in risky financial activities and failing to meet financial obligations can lead to defaults
D. Defaults only happen when speculators and creditors avoid taking risks

Answer 1

Defaults on the part of speculators and creditors can occur due to engaging in risky financial activities and failing to meet financial obligations. Depositors' withdrawals can also lead to defaults for banks.

Step-by-step explanation:

Defaults on the part of speculators and creditors can occur due to engaging in risky financial activities and failing to meet financial obligations. Speculators and creditors can experience defaults if they take on excessive risks without the ability to repay their debts. For example, speculators who invest heavily in a particular stock or industry that experiences a sudden decline in value may not be able to recoup their losses and default on their obligations.

Withdrawals by depositors can also lead to defaults for banks. When depositors start to fear that a bank might fail, they may withdraw their money, and if many depositors do this simultaneously, the bank may not have enough funds to meet their demands and will fail.