Which of the following can trigger a financial crisis?

A rise in interest rates can trigger a financial crisis due to its broad impact on borrowing costs and spending behavior within the economy. When interest rates increase, it becomes more expensive for individuals and businesses to borrow money. This leads to higher loan repayments on existing debt and discourages new borrowing, causing a slowdown in consumer spending and business investments.

As borrowing costs rise, consumers may reduce their expenditures on goods and services, which can lead to lower business revenues. This decline can subsequently result in businesses laying off employees, further reducing consumer spending and creating a vicious cycle. Additionally, higher interest rates can lead to a decrease in asset prices, particularly in real estate and stock markets, which can erode household wealth and reduce consumer confidence.

On the other hand, the other options provided would generally not trigger a financial crisis. An increase in consumer spending typically supports economic growth, a decrease in inflation rates tends to ease economic pressures and can maintain or boost spending power, and stronger regulatory frameworks are aimed at reducing risks in the financial system and promoting stability. Hence, while higher interest rates can catalyze unfavorable economic conditions and potentially result in a financial crisis, the other choices are more supportive of healthy economic activity.