If people speculate that a run on one bank will cause a run on all banks in the financial system, and this speculation proves accurate, then the financial system would experience what is known as a(n)

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A bank panic refers to a situation where depositors of a bank, fearing that the bank will become insolvent, rush to withdraw their funds. If this behavior spreads to other banks in the financial system, it can lead to a broader financial crisis. This is because banks rely on the confidence of depositors to maintain liquidity, and a run on one bank can quickly spread to others. This is known as a contagion effect.

If People Speculate That a Run on One Bank Will