Depositors have a strong incentive to show up first to withdraw their funds during a bank crisis because banks operate on a
A)last-in,first-out constraint.
B)sequential service constraint.
C)double-coincidence of wants constraint.
D)everyone-shares-equally constraint.

Question

Quizplus · Accepted Answer

Banks operate on a sequential service constraint, meaning that depositors who arrive first have priority in withdrawing their funds during a bank crisis. This creates a strong incentive for depositors to arrive early to ensure they can withdraw their funds before the bank potentially runs out of money.

Depositors Have a Strong Incentive to Show Up First to Withdraw