« previous next »

Author Question: It is in the interest of each depositor to withdraw her money from a bank if all other depositors ... (Read 81 times)

JMatthes

  • Hero Member
  • *****
  • Posts: 578
on: Jun 30, 2018
It is in the interest of each depositor to withdraw her money from a bank if all other depositors are doing the same, even when the bank's assets are sound. Discuss. As part of your answer clearly state whether the statement is true or false.
 
  What will be an ideal response?

Question 2

When an economy is in a liquidity trap
 
  A) monetary policy cannot be used to influence the exchange rate.
  B) monetary policy can be used to drive interest rates down, but not to drive them up.
  C) there is an excess demand for bonds.
  D) people and institutions avoid holding cash balances.
  E) it can escape only by introducing a hard, or illiquid, currency.


Ddddd

  • Sr. Member
  • ****
  • Posts: 334
Reply #1 on: Jun 30, 2018
Answer to Question 1

True. Students should elaborate on bank run and stress the atmosphere of financial panic, which will lead to self-fulfilling expectations.

Answer to Question 2

A


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Adult head lice are gray, about ? inch long, and often have a tiny dot on their backs. A female can lay between 50 and 150 eggs within the several weeks that she is alive. They feed on human blood.

Did you know?

In the ancient and medieval periods, dysentery killed about ? of all babies before they reach 12 months of age. The disease was transferred through contaminated drinking water, because there was no way to adequately dispose of sewage, which contaminated the water.

Did you know?

Certain rare plants containing cyanide include apricot pits and a type of potato called cassava. Fortunately, only chronic or massive ingestion of any of these plants can lead to serious poisoning.

Did you know?

Drugs are in development that may cure asthma and hay fever once and for all. They target leukotrienes, which are known to cause tightening of the air passages in the lungs and increase mucus productions in nasal passages.

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

How to calculate simple interest (Part 1) How to calculate simple interest (Part 1)
Calculate the amount of interest that will be charged on $9000.00 borrowed for four months at ... Calculate the amount of interest that will be charged on $9000.00 borrowed for four months at ...
A non-interest-bearing five-year note for $54600.00 issued May 1, 2015, is discounted April 1, ... A non-interest-bearing five-year note for $54600.00 issued May 1, 2015, is discounted April 1, ...
A bank statement shows a balance of $2,970.31 The check register of the account owner shows an ... A bank statement shows a balance of $2,970.31 The check register of the account owner shows an ...
Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in ... Rita borrows $4,500 from the bank at 9 percent annually compounded interest to be repaid in ...
Learn Canadian money grade 1 Learn Canadian money grade 1
Video: Four Giant Convection Cells oF Earth

For a complete list of videos, visit our video library