Self-paced · U.S. History

Explain deposit insurance through bank-run incentives — teaching bridge

Narrow New Deal economic-policy bridge on covered loss, depositor confidence, withdrawal incentives, and bank runs.

1 focused skill · About 25 minutes · Untimed

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A short diagnostic

Answer 2 questions before studying. Two questions sample each skill; an unanswered skill is not a failed skill. You can change answers until you check them.

In a fictional banking crisis, depositors believe only those who withdraw early will recover their savings. How can that belief contribute to a run?

It requires banks to stop making all loans permanently.It proves every bank is profitable.It gives many depositors a reason to demand cash at the same time.It guarantees the supply of cash will rise automatically.

A classroom case states that an eligible deposit is fully insured under the rules in effect. What does that protection most directly change?

The depositor’s risk of losing the covered amount because the insured bank failsThe market price of every stock the depositor ownsThe requirement that every business earn a profitThe possibility that an insured bank could ever close