Depositors Have a Strong Incentive to Show Up First to Withdraw

question 33

Multiple Choice

Depositors have a strong incentive to show up first to withdraw their funds during a bank crisis because banks operate on a

• A)last-in,first-out constraint.
• B)sequential service constraint.
• C)double-coincidence of wants constraint.
• D)everyone-shares-equally constraint.

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Definitions:

Consumer Equilibrium

The point at which the satisfaction obtained from a good or service equals the price paid for it, maximizing utility.

Substitution Effect

The change in consumption resulting from a change in relative prices, leading consumers to substitute away from higher-priced goods towards lower-priced ones.

Price Change

An alteration in the cost to purchasers of goods and services over time or in response to supply and demand conditions.

Total Utility

The total satisfaction a consumer gets from consuming a certain quantity of goods or services.