A run on a bank may occur if
A)depositors withdraw some funds to invest in the stock market.
B)required reserves are increased.
C)interest rates are raised.
D)depositors lose confidence in the bank and attempt to withdraw all their funds.
E)All of these responses are correct.

Question

Quizplus · Accepted Answer

A run on a bank occurs when depositors lose confidence in the bank's ability to fulfill their withdrawal requests. This can happen due to rumors, news of financial instability or insolvency, or other factors that shake depositors' faith in the bank. When a significant number of depositors attempt to withdraw their funds simultaneously, it can lead to a liquidity crisis for the bank and potentially trigger its failure. Factors such as withdrawals for investment purposes, reserve requirements, and interest rates may affect the bank's operations but are unlikely to trigger a run on the bank on their own.

A Run on a Bank May Occur If