Which of the following describe a common cause of bank panics? Check all that ap

ID: 1222133 • Letter: W

Question

Which of the following describe a common cause of bank panics? Check all that apply.

--- Potential buyers of the assets of a bank, incorrectly rumored to be distressed, may suspect the assets to be of poor quality.

---- A run on a given bank is often contagious and spreads to other financial institutions.

---- Rumors that a bank is in financial trouble spread easily.

Which of the following are reasons why bank panics were largely eliminated after 1933? Check all that apply.

--- The Federal Reserve ("the Fed") stands ready to inject reserves into the system more quickly in a crisis.

--- State-chartered banks are freer from the Fed's regulations.

--- Banks are required to hold a significant percentage of their assets as bank capital.

Ans. 1

A run on a given bank is often contagious and spreads to other financial institutions.

Ans 2. The Federal Reserve ("the Fed") stands ready to inject reserves into the system more quickly in a crisis.

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