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7. Suppose you are a depositor at Duckworth's Bank, which has the balance sheet shown in Table 18-2. Deposit insurance does not exist. You originally
7. Suppose you are a depositor at Duckworth's Bank, which has the balance sheet shown in Table 18-2. Deposit insurance does not exist. You originally deposited your money in Duckworth's Bank because its branch locations are more convenient than those of other banks. Assets Reserves Securities Loans Table 18-2 Balance sheet Liabilities $10 Deposits $10 Borrowings $80 Net Worth $100 TOTAL $70 $20 $10 $100 TOTAL a. Suppose you know that Duckworth's other depositors plan to keep their money there. Should you do the same or withdraw your money and deposit it elsewhere? b. Suppose you know that other depositors plan to make large withdrawals from Duckworth's Bank. What should you do? c. What do your answers to parts (a) and (b) tell you about the likelihood and causes of bank runs? 7. Suppose you are a depositor at Duckworth's Bank, which has the balance sheet shown in Table 18-2. Deposit insurance does not exist. You originally deposited your money in Duckworth's Bank because its branch locations are more convenient than those of other banks. Assets Reserves Securities Loans Table 18-2 Balance sheet Liabilities $10 Deposits $10 Borrowings $80 Net Worth $100 TOTAL $70 $20 $10 $100 TOTAL a. Suppose you know that Duckworth's other depositors plan to keep their money there. Should you do the same or withdraw your money and deposit it elsewhere? b. Suppose you know that other depositors plan to make large withdrawals from Duckworth's Bank. What should you do? c. What do your answers to parts (a) and (b) tell you about the likelihood and causes of bank runs
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