Scenario 29-1
The Monetary Policy of Tazi is controlled by the country's central bank known as the Bank of Tazi. The local unit of currency is the Tazian dollar. Aggregate banking statistics show that collectively the banks of Tazi hold $375 million of required reserves, $225 million of excess reserves, have issued $7,500 million of deposits, and hold $750 million of Tazian Treasury bonds. Tazians prefer to use only demand deposits and so all money is on deposit at the bank.
-Which of the following will help to prevent bank runs?
A)A 0% reserve requirement
B)100% reserve banking
C)Lack of government insurance of deposits
D)Fractional reserve banking

Question

Quizplus · Accepted Answer

100% reserve banking means that banks hold an amount of reserves equal to the amount of deposits. This approach can prevent bank runs because every depositor could theoretically withdraw their funds at the same time without causing the bank to run out of reserves.

Scenario 29-1 The Monetary Policy of Tazi Is Controlled by the Country's