What constitutes a financial crisis?

A financial crisis is characterized by a significant and rapid decline in the value of financial institutions or assets. This situation often arises due to a variety of factors, including economic downturns, loss of confidence among investors, or systemic failures within the financial system. When the value of assets plummets, it can lead to insolvency, bank failures, and widespread economic distress, affecting individuals, businesses, and the economy as a whole.

The other options present scenarios that typically do not align with the conditions of a financial crisis. A steady rise in asset values indicates a prosperous market where investors are confident, which is the opposite of a crisis. Similarly, stable economic growth over time reflects a healthy economy, while increased investor confidence and market stability suggest that the financial system is functioning effectively. These conditions are generally associated with strength and growth in the economy rather than the turmoil and decline characteristic of a financial crisis.