5. Bank runs and regulation Aa Aa Which of the following describe a common facto

Question

5. Bank runs and regulation Aa Aa Which of the following describe a common factor behind the occurrence of bank runs? Check all that apply. Fear regarding a bank's solvency can be a self-fulfilling prophesy. Financial institutions have little concern regarding their soundness. Bank assets are illiquid. In the table below, select the term from the dropdown list on the right-hand side to match the given bank regulation description on the left-hand side. Bank Regulation Description Term 1. The arrangement whereby the Federal Reserve is prepared to lend funds to troubled banks 2. A federal government guarantee that protects the funds of depositors up to a certain limit Deposit insurance The discount window Reserve requirements

Explanation / Answer

Fear regarding bank solvency

bank assets and illiquid

These two reasons can make sure that bank goes out of business, If bank assets are not liquid and people demand cash then you can be sure that bank will run out of cash

1) Discount window

2) Deposit insurance

Thank you

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