The Diamond-Dybvig Model Provides a Rationale for the Phenomenon of

question 20

Multiple Choice

The Diamond-Dybvig model provides a rationale for the phenomenon of

• A) undercapitalized banks.
• B) banks making overly risky loans.
• C) bank runs.
• D) deflation.
• E) banks carrying too many illiquid assets.

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Definitions:

Piaget

A Swiss psychologist known for his pioneering work in child development, specifically for his theory of cognitive development that describes how children develop intellectual abilities.

Accommodation

A concept in psychology referring to the process of adjusting one’s schemas to incorporate new experiences.

Equilibration

The process in developmental psychology where individuals balance assimilation and accommodation to create stable understanding.

Postconventional

A stage in Kohlberg's theory of moral development where individuals base their moral judgments on principles that transcend societal and legal norms, focusing on universal ethical principles.