The reason that a run on a single bank can turn into a bank panic that threatens the entire financial system is:
A) information asymmetries.
B) moral hazard.
C) the lack of regulation.
D) the increased reliance on web-based funds transfers.

Question

Quizplus · Accepted Answer

A run on a single bank can lead to a bank panic due to information asymmetries. Depositors may not know the true financial health of the bank and may withdraw their funds out of fear, causing the bank to fail. This can create a domino effect as other depositors at other banks may also begin to withdraw their funds out of fear, leading to a wider banking panic.

The Reason That a Run on a Single Bank Can