Chapters 14, 15 - Chapters 14 & 15 Chapter 14- Odd...

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Chapter 14- Odd Conceptual 1. A bank run may turn into a bank panic if everyone starts taking all of their money out of the bank because of some rumor. People will start to panic that they will lose their money if they do not get it out of the bank right away. When everyone is panicking and is running to get their money out of the bank all at once, this is a bank panic. 3. Governments that offer deposit insurance are more likely to have financial crises than ones who do not because in these countries people are more likely to put more money into the banks since they know it is insured. This will cause a crisis in the event that when people panic and want to take all of their money out of the bank knowing they are insured for it, but there is not enough printed money to go around since a lot of money today is never in the form of paper. This would cause a shortage of money and a crisis. 5. The lender of last resort creates moral hazard in that, they are probably just delaying the inevitable by lending failing banks even more money at such a high interest rate that they will never be able to pay it back. 7.
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This note was uploaded on 10/31/2010 for the course ECON 2310 taught by Professor Williams during the Spring '10 term at Western New Mexico.

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Chapters 14, 15 - Chapters 14 & 15 Chapter 14- Odd...

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