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.

---

Definitions:

Historical Rates

Exchange rates used for the conversion of items on the financial statements that have remained unchanged from past to present.

Foreign Subsidiary

A company owned or controlled by another company, the parent company, that is based in a different country than the subsidiary.

Functional Currency

The functional currency is the main currency used by a business or economic entity, reflecting the primary economic environment in which it operates.

Opening Inventory

The value of the goods available for sale at the beginning of an accounting period.