In the Diamond Dybvig Model, a Bank Run Occurs When

question 44

Multiple Choice

In the Diamond Dybvig model, a bank run occurs when

• A) depositors think the bank managers have absconded with the bank's assets.
• B) depositors see other depositors running on other banks.
• C) depositors think that everyone else will request withdrawal.
• D) depositors think the central bank cannot be trusted.
• E) the banks suspends payments.

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Definitions:

Positive Output

A situation in which an economic model or production process results in a positive amount of goods or services being produced.

Supply Function

A mathematical relationship that shows the quantity of a good or service that producers are willing and able to sell at different prices.

Long-Run Cost Function

A graphical or mathematical representation that shows the lowest cost at which a firm can produce any given level of output in the long run, when all inputs are variable.

Positive Output

A situation where the production of goods or services is above zero.