When Banks Fail During a Financial Crisis,________

question 66

Multiple Choice

When banks fail during a financial crisis,________.

• A)the removal of these weak institutions serves to strengthen the financial system
• B)the elimination of competitors is likely to spark a credit boom
• C)there is a loss of information that can cause the crisis to worsen
• D)surviving banks resort to financial engineering to retain customers

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Definitions:

Money Supply

The entire monetary value available in an economy at a designated time.

Savings Deposits

Deposits that earn interest but have no specific maturity date.

Time Deposits

Bank deposits that cannot be withdrawn before a date specified at the time of deposit without incurring penalties.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits and other liquid assets held by the central bank.