A Bank Run Can Break a Bank Because

question 94

Multiple Choice

A bank run can break a bank because:

• A) borrowers default on their loans, and the bank's assets become worthless.
• B) banks cannot quickly convert illiquid loans to liquid assets without facing a large financial loss.
• C) depositors' panic spreads to borrowers, who want to take additional loans from the bank.
• D) the bank's reserves kept with the Federal Reserve are in the form of illiquid U.S. Treasury bonds.

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