THE GREAT DEPRESSION 1929 1940
THE GREAT DEPRESSION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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many depositors withdrawing their money at once
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the result when the government spends more than it collects in taxes
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stockbrokers stopped margin loans
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None of the above
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Detailed explanation-1: -When numerous customers withdraw the same amount simultaneously, banks, which store only a fraction of the total deposited amount on the premises, begin to lose their accessible physical money. It leads to a significant loss of cash, putting banks at risk of going bankrupt.
Detailed explanation-2: -A bank run occurs when large groups of depositors withdraw their money from banks simultaneously based on fears that the institution will become insolvent. With more people withdrawing money, banks will use up their cash reserves and ultimately end up defaulting.
Detailed explanation-3: -A bank run occurs when many customers withdraw all their money simultaneously from their deposit accounts with a banking institution for fear that the institution is, or might become, insolvent.
Detailed explanation-4: -A run on a bank occurs when a large number of depositors, fearing that their bank will be unable to repay their deposits in full and on time, simultaneously try to withdraw their funds immediately.
Detailed explanation-5: -Another phenomenon that compounded the nation’s economic woes during the Great Depression was a wave of banking panics or “bank runs, ” during which large numbers of anxious people withdrew their deposits in cash, forcing banks to liquidate loans and often leading to bank failure.