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:

Government

Government refers to the group or system of individuals governing an organized community, often a state, and it is responsible for creating and enforcing laws, policies, and regulations.

Total Surplus

The sum of consumer and producer surplus, representing the total net benefit to society from the production and consumption of goods or services.

AC

Short for Alternating Current, a type of electrical current where the flow of electric charge periodically reverses direction.

MC

Marginal Cost, the increase in total cost that arises from producing one additional unit of a product or service.