ng cengage.com 8. Banking Panics And Regulations Whi Which of the folowing descr
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ng cengage.com 8. Banking Panics And Regulations Whi Which of the folowing describe a common MindTap- Cengage Learing 5% MINDTAP Aplia Homework: Money and the Banking System Back to Assignment Attempts Keep the Highest: 1/2 8. Banking panics and regulations Which of the following describe a common factor behind the occurrence of bank runs? Check all that apply Untounded fear regarding a bank's ability to meet its obligations can cause the bank to become distressed. Financial institutions have itie concern regarding their soundness. Competition forces banks to have insufficient revenues which of the following are reasons why bank panics were largely eliminated after 1933? Check ail that apply The Federal Reserve ("the Fed") stands ready to inject reserves into the system more quickly in a crisis. The shadow banking system has grown larger than the regular banking system The Fed and other government agencies continuously monitor the financial condition of banks Grade t Now Save & Cont Continue without ss 30Explanation / Answer
The money the depositor held in the bank is the liability of the bank. The bank is liable to pay the deposit at any time the depositor wants. At the time of financial crisis, if depositors lose confidence in banks solvency, they start withdraw their deposit. When all of the depositors try to withdraw their money at once, it is called ‘bank run’. The bank could not give out this huge amount of money at one time.
To avoid such bank run, in 1934 Federal Deposit Insurance Corporation (FDIC) was created. FDIC guarantees the depositor of their deposit up to some limit. Moreover, Fed act as lender of last resort to inject the bank with enough fund to meet the demand of their depositor at the time of need. This implies each penny deposited with the bank is insured and secured.
Therefore, the correct options are:
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