1/ What did this game teach you about the trade-off between profit and risk? 2/H

Question

1/ What did this game teach you about the trade-off between profit and risk?

2/How might trade-offs lead to a banking panic? 2/What interventions may prevent a bank run? 3/How might deposit insurance impact a bank run?

I really need help!!

1. SUNAM BANK & TRUST Day 1 If the bank You nvested: remains solvent, ou'll receive 150 on Day 4 $100 LEAVE IN BANK WÍTHDRAW Rules 00:23 In the bank run game, students are customers and have to decide whether to leave their money in a bank to earn interest or to withdraw early to avoid losing part or all of their deposit. If a sufficient number of customers withdraw money early, the bank might collapse. 1. What did this game teach you about the trade-off between profit and risk?

Explanation / Answer

1) We can see here that If i take risk then there is a changce that i might earn $50 interest but i do not take risk then i will not earn any extra money but will also not lose my money if things go sideways. So to earn high profits one has to take risk.

2) If many people think that they do not want to take risk, they might withdraw their money which might lead to banking panic. This is also known as bank run.

3) There are several ways that a bank might try to prevent bank run.

4) Deposit insurance pays the money in case bank is not able to pay back deposits. So deposit insurance mitigates the risk helping banks to prevent bank run.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.