Question

The film Mary Poppins features a bank run as a plot device. You can find those scenes here: https://www.youtube.com/watch?v=C6DGs3qjRwQ

The film It's a wonderful life also features such a plot device. The modern financial system, by comparison, is engineered to reduce or eliminate the risk of bank runs. Which of the following is FALSE?

• A.

  The Federal Reserve serves as a lender of last resort so that banks can always borrow enough to cover their deposits.

• D.

  Banks can borrow from each other on a short-term basis to cover their deposits.

• C.

  Banks are required to maintain a minimum proportion of their deposits as cash to maintain liquidity.

• B.

  The Federal Deposit Insurance Corporation insures consumers' bank deposits against loss up to $500 million.

Answer 1