Which statement best explains whether bank runs are a problem for the economy?
A) They are not a problem because bank runs will affect neither the money supply nor the money multiplier.
B) Bank runs are only a problem for insolvent banks.
C) They are a problem, but they can be neither prevented nor stopped by a central bank.
D) Bank runs are a problem because bank failures may spread to healthy banks.

Question

Quizplus · Accepted Answer

Bank runs are a problem because they can lead to bank failures, which in turn can spread to healthy banks and have a negative impact on the economy. While a central bank can intervene to help prevent or stop bank runs, it may not always be successful in doing so. Therefore, bank runs pose a potential danger to the stability of the banking system and the economy as a whole.

Which Statement Best Explains Whether Bank Runs Are a Problem