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. Suppose there is a run on the bank caused by rumor of bank's financial insolvency with a massive withdrawal of deposits by households and

. Suppose there is a run on the bank caused by rumor of bank's financial insolvency with a massive withdrawal of deposits by households and business entities. What would be the effect of this event on short-term interest rates? If the Fed wants to intervene to prevent from this effect, what would be the appropriate action it should take?

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