The Fear That Liquidity Problems at One Bank May Cause

question 19

True/False

The fear that liquidity problems at one bank may cause depositors to worry about the solvency of other banks is called the disease effect.

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Definitions:

Civil Law

A legal system based on codified laws and principles, as opposed to common law, which is based on precedent and judicial decisions.

Codified System

A system where laws and regulations are organized and written down into a systematic code or collection.

Common Law

A body of legal precedents derived from judicial decisions, as opposed to statutes or written laws enacted by legislature.

Judge-made Law

Law established through decisions made by judges in court cases, also known as common law or case law.