The tendency for a bank run at one bank to increase the likelihood at another is called
A) economies of scale
B) effective monitoring
C) contagion
D) moral hazard
E) Nash Equilibrium

Question

Quizplus · Accepted Answer

Contagion refers to the spillover effects of a bank run from one bank to another. When depositors lose confidence in one bank, they may begin to withdraw their funds from other banks, leading to a wider panic and a systemic crisis. This phenomenon is observed during financial crises and highlights the interconnectedness and interdependence of banks in the financial system.

The Tendency for a Bank Run at One Bank to Increase