A Banking Panic Is an Episode in Which

question 84

Multiple Choice

A banking panic is an episode in which

• A) depositors,spurred by news or rumours of the possible bankruptcy of multiple banks,rush to withdraw deposits from the banking system.
• B) commercial banks,fearing Bank of Canada sanctions,unwillingly participate in open-market operations.
• C) commercial banks,concerned about high interest rates,rush to borrow from the overnight market.
• D) depositors,afraid of increasing interest rates,attempt to engage in borrowing from the Bank of Canada.
• E) the Bank of Canada,concerned about unusually rapid increases in the money supply,refuses to make loans to commercial banks.

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Definitions:

365-Day Year

A convention used in interest calculations assuming a full year consists of 365 days.

Total Amount

The complete sum or aggregate of quantities, such as the final amount due for payment or the sum total of assets.

Simple Interest

Interest calculated only on the initial amount of money deposited or loaned, not on any interest accrued over time.

Ordinary Interest

Interest calculated based on a 360-day year, often used in banking for loans and savings.