When the risk that some banks might fail increases, depositors may not have enough information to determine whether their bank is a good one or one of the banks at greater risk to fail. Depositors have an incentive to withdraw their deposits before the bank runs out of funds. If this becomes a widespread occurrence, it is known as:

Question

Business

Ty Baker

29 January, 09:56

When the risk that some banks might fail increases, depositors may not have enough information to determine whether their bank is a good one or one of the banks at greater risk to fail. Depositors have an incentive to withdraw their deposits before the bank runs out of funds. If this becomes a widespread occurrence, it is known as:

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Answers (1)

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Bianca Pineda · Answer 1

bank panic

Explanation:

Based on the information provided within the question it can be said that if this becomes a widespread occurrence, it is known as a bank panic. This term refers to a financial crisis that occurs when all the customers of a bank try to withdraw their money from the bank. This causes the bank to go out of business which leads to people panicking.