In a banking crisis, banks usually:
A)see an increase in the value of their assets.
B)lend out all of their excess reserves.
C)hold more excess reserves than usual.
D)offer discounts to customers to give them the incentive to borrow money.

Question

Quizplus · Accepted Answer

In a banking crisis, banks typically hold more excess reserves than usual to ensure they have enough liquidity to meet any withdrawal demands from their customers. This is done to prevent a bank run and potential bankruptcy. Therefore, choice C is the best answer. The other options do not reflect the typical behavior of banks in a crisis situation.

In a Banking Crisis, Banks Usually