Author Question: A bank faced with the wholesale loss of deposits is likely to shut down despite fundamentally sound ... (Read 28 times)

JMatthes · **on:** Jun 30, 2018

A bank faced with the wholesale loss of deposits is likely to shut down despite fundamentally sound balance sheet. Why could this be?

A) Banks have accountants that are too optimistic.
B) Banks purposely lie about their balance sheets in order to attract more clients.
C) Many bank assets are illiquid and cannot be sold quickly to meet deposit obligations without substantial loss to the bank.
D) Many banks operate on a budget that exceeds their actual reserves.
E) Many banks will shut down to preserve their interest profits.

Question 2

Explain why the United States dollar became the postwar world's key currency.

What will be an ideal response?

deja · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

C

Answer to Question 2

(1 ) The early convertibility of the U.S. dollar in 1945.
(2 ) The special position of the dollar under the Bretton Woods system.
(3 ) The strength of the American economy relative to the devastated economies of Europe and Japan.
(4 ) Central banks naturally found it advantageous to hold their international reserves in the form of interest-bearing dollar assets.