Final answer:
The collapse of Downtown bank affecting the entire economy exemplifies Systemic Risk, which endangers the stability of the financial market, as seen during the 2008-2009 Great Recession.
Step-by-step explanation:
When a major bank such as Downtown bank collapses and files for bankruptcy, causing negative impacts on the overall economy, this is an example of Systemic Risk. Systemic Risk refers to the risk of collapse of an entire financial system or entire market, as opposed to risk associated with any one individual entity, group, or component of a system. It can be caused by an event that triggers a severe instability or collapse of the entire financial system, potentially leading to a market-wide crisis.
The 2008-2009 Great Recession is a historical example where the decline in the value of mortgage-backed securities led to systemic issues, illustrating how the failure of banking institutions can threaten the stability of the financial system and the economy as a whole.
Answer: Option 3: Systemic Risk