Q. With reference to doom loop, consider the following statements;
1.A doom loop is the circle of vulnerability where a country’s banking system can be severely hurt by volatility in the economy.
2.A country is at risk of a doom loop when a shock to one part of its economic system is amplified by its effect on another.
Which of the statements given above is/are correct?

[A] 1 only

[B] 2 only

[C] Both 1 and 2

[D] Neither 1 nor 2

Answer: C
Notes:

A doom loop is the circle of vulnerability where a country’s banking system can be severely hurt by volatility in the economy. A country is at risk of a doom loop when a shock to one part of its economic system is amplified by its effect on another.

Source: The Economist