When there is a run on a bank, this bank is facing ___ risk -inflation -interest...
When there is a run on a bank, this bank is facing ___ risk
-inflation
-interest rate
-operational
-liquidity
Homework Answers
Option D
- When there is a run on a bank, this bank is facing liquidity risk.
- A liquidity risk is said to arise when the banks face insolvency due to their inability to pay debts. This makes banks more vulnerable to runs.
- Liquidity risk is bad for Economy as the banks reduce lending to people and it becomes difficult for the banks to convert their assets into cash to meet the demands of people.
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When there is a run on a bank, this bank is facing ___ risk
-inflation
-interest...
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What is the relationship between a bank run and liquidity risk? (15 marks )
What is the relationship between a bank run and liquidity risk? (15 marks )
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The real risk-free rate of interest is expected to remain constant at 2.5%. The inflation rate is...
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