A situation in which a solvent bank does not have sufficient cash on hand to satisfy the withdrawal demands of depositors is called a(n) _____ crisis.
A) lending
B) shadow
C) insolvency
D) liquidity

Question

Quizplus · Accepted Answer

A liquidity crisis is a situation where a firm or bank runs out of cash or liquid assets and is therefore unable to fulfill its short-term obligations, such as paying depositors who request withdrawals. This is different from insolvency, which refers to a situation where a firm's liabilities exceed its assets and it is unable to repay its debt in the long term.

A Situation in Which a Solvent Bank Does Not Have