A banking panic is an episode in which
A) depositors,spurred by news or rumours of the possible bankruptcy of multiple banks,rush to withdraw deposits from the banking system.
B) commercial banks,fearing Bank of Canada sanctions,unwillingly participate in open-market operations.
C) commercial banks,concerned about high interest rates,rush to borrow from the overnight market.
D) depositors,afraid of increasing interest rates,attempt to engage in borrowing from the Bank of Canada.
E) the Bank of Canada,concerned about unusually rapid increases in the money supply,refuses to make loans to commercial banks.

Question

Quizplus · Accepted Answer

A banking panic is a situation where depositors suddenly lose confidence in the banking system and rush to withdraw their deposits, causing multiple banks to potentially face bankruptcy. This can lead to a domino effect of bank failures, exacerbating the panic and causing further withdrawals.

A Banking Panic Is an Episode in Which