What Is the Most Effective Mechanism for Reducing Runs on Banks

question 94

Multiple Choice

What is the most effective mechanism for reducing runs on banks?  

• A) the overnight loans rate 
• B) deposit insurance 
• C) having a reserve requirement 
• D) open market operations

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Definitions:

Product Differentiation

The strategy of setting a product or service apart from others in the industry to enhance its attractiveness to a specific target group.

Allocative Efficiency

A condition of distributing resources in which improving the situation of one person necessitates the detriment of another.

Long-Run Equilibrium

A state in which all factors of production can be adjusted, markets clear, and no economic agents have the incentive to change their behavior.

Marginal Revenue

The additional income that a business receives from selling one more unit of a good or service.