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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banks were not insured by the government
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government ran out of money for the banks
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banks wasted all of their money on bad investments
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people stopped putting their money in banks
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Detailed explanation-1: -During a bank run, a large number of depositors lose confidence in the security of their bank, leading them all to withdraw their funds at once. Banks typically hold only a fraction of deposits in cash at any one time, and lend out the rest to borrowers or purchase interest-bearing assets like government securities.
Detailed explanation-2: -Nearly all banks in the United States are FDIC-insured, which means even if a bank were to fail, your money is protected. The FDIC insures each bank account up to $250, 000 per depositor per account.
Detailed explanation-3: -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-4: -The most common cause of bank failure occurs when the value of the bank’s assets falls to below the market value of the bank’s liabilities, which are the bank’s obligations to creditors and depositors. This might happen because the bank loses too much on its investments.