Question
A run on the banks occurs when a large number of depositors lose confidence in the banking system and they then go to the bank
A "run on the banks" occurs when a large number of depositors lose confidence in the banking system and they then go to the bank to withdraw their deposits.The response of the banks is usually to close their doors and refuse to allow customers to withdraw their money.
(i)Why do the banks close their doors?(1 mark)
(ii)Explain how a fractional banking system can lead to this outcome.(4 marks)
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Intermediate Microeconomics
Authors: Hal R. Varian
9th edition
978-0393123975, 393123979, 393123960, 978-0393919677, 393919676, 978-0393123968
