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The global financial crisis of 2008 is considered to be the most serious world-wide financial crisis, which started with the sub-prime lending crisis in USA in 2007. The sub-prime lending crisis led to the banking crisis in 2008 with the collapse of Lehman Brothers in 2008. The sub-prime lending refers to the provision of loans to those borrowers who may have difficulties in repaying loans, and it arises because of excess liquidity following the East Asian crisis. Which one of the following sequences shows the CORRECT order of events as per the given passage? A. East Asian crisis -> sub-prime lending crisis -> global financial crisis -> banking crisis B. Sub-prime lending crisis -> global financial crisis -> banking crisis -> East Asian crisis C. Banking crisis -> East Asian crisis -> sub-prime lending crisis -> global financial crisis D. East Asian crisis -> banking crisis -> sub-prime lending crisis -> global financial crisis

GATE 2020 · General Aptitude · Verbal Reasoning · hard

Answer: Option A is correct: East Asian crisis -> sub-prime lending crisis -> global financial crisis -> banking crisis.

  1. Identify the starting event: The passage says sub-prime lending arises because of excess liquidity following the East Asian crisis. So the East Asian crisis is the earliest event.
  2. Place the sub-prime lending crisis: The sub-prime lending crisis began in USA in 2007 as a direct consequence of excess liquidity. It comes second: East Asian crisis -> sub-prime lending crisis.
  3. Place the global financial crisis: The passage states the global financial crisis started with the sub-prime lending crisis. It comes third: ... -> sub-prime lending crisis -> global financial crisis.
  4. Place the banking crisis last: The sub-prime lending crisis led to the banking crisis in 2008 (Lehman Brothers collapse). The banking crisis is part of the global financial crisis, occurring last in the chain.
  5. Match with options: Correct sequence: East Asian crisis -> sub-prime lending crisis -> global financial crisis -> banking crisis. This matches option A exactly.