Which Statement Best Explains Whether Bank Runs Are a Problem

question 59

Multiple Choice

Which statement best explains whether bank runs are a problem for the economy?

• A) They are not a problem because bank runs will affect neither the money supply nor the money multiplier.
• B) Bank runs are only a problem for insolvent banks.
• C) They are a problem, but they can be neither prevented nor stopped by a central bank.
• D) Bank runs are a problem because bank failures may spread to healthy banks.

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Definitions:

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, as the scale of production and the cost per unit of production decrease.

Average Total Cost

The total cost of production divided by the number of units produced, representing the per-unit cost of production.

Total Revenue

The total income generated by a company from the sale of goods or services before any expenses are subtracted.

Economies of Scale

Cost advantages that enterprises obtain due to the scale of their operations, leading to a reduction in average costs per unit as output increases.