Which of the following is true of a banking crisis?
A) Individuals and companies withdraw their deposits from banks.
B) It results in a sharp appreciation in the value of the currency.
C) It happens due to a decline in domestic borrowing.
D) It occurs due to asset price deflation.
E) Banks tend to decrease interest rates during a banking crisis.

Question

Quizplus · Accepted Answer

Individuals and companies withdraw their deposits from banks during a banking crisis, leading to a decrease in the bank's liquidity and potentially triggering a financial crisis.

Which of the Following Is True of a Banking Crisis