Contagion effects occur-absence of deposit insurance

Reference no: EM13331730

Contagion effects occur, in the absence of deposit insurance, because:

A) when one bank becomes insolvent, most banks generally become insolvent.

B) U.S. banking regulations effectively guarantee that all banks will receive the same level of profits or losses.

C) there is asymmetric information concerning the solvency of banks.

D) bank failures tend to occur more frequently during periods of rapid economic growth.

Reference no: EM13331730

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