In a Severe Financial Crisis, If the Public Fears That

question 176

True/False

In a severe financial crisis, if the public fears that a bank's assets aren't worth enough to cover its debts, a lender of last resort is not likely to be able to prevent bankruptcy of the bank.

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Definitions:

Long Run

A period in economics in which all factors of production and costs are variable, allowing all inputs to be adjusted.

Perfectly Inelastic

A situation where demand does not change at all in response to changes in price.

Quantity Supplied

The total amount of a good or service that producers are willing and able to sell at a certain price over a specified period.

Price Effect

The impact on consumer demand and company revenue as the cost of a good or service changes.