Which of the following with regard to the term T^ank run is correct?

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Q: 89 (CDS-II/2016)

Which of the following with regard to the term T^ank run’ is correct?

question_subject: 

Economics

question_exam: 

CDS-II

stats: 

0,44,30,13,4,55,2

keywords: 

{'bank': [0, 1, 0, 1], 'banks': [5, 6, 5, 25], 'net balance': [0, 0, 0, 1], 'market': [0, 0, 1, 0], 'total deposits': [0, 0, 0, 2], 'deposit holders': [0, 0, 0, 1], 'business': [0, 0, 1, 6], 'cash': [0, 1, 1, 3], 'highest credit': [0, 0, 0, 1], 'total liabilities': [0, 0, 0, 1], 'panic situation': [0, 0, 0, 1], 'period': [9, 3, 3, 8], 'ratio': [1, 0, 1, 12]}

Option 1 is incorrect. "Tank run" is not related to the net balance of money a bank has in its chest at the end of the day`s business. The term refers to a different concept.

Option 2 is incorrect. "Tank run" is not related to the ratio of a bank`s total deposits and total liabilities. It is not a financial metric like the ratio of deposits to liabilities.

Option 3 is correct. "Tank run" refers to a panic situation when deposit holders start withdrawing cash from banks. This situation occurs when there is a loss of confidence in the bank`s ability to meet its financial obligations. It can lead to a domino effect, where one bank run triggers more bank runs and can potentially lead to a banking crisis.

Option 4 is incorrect. "Tank run" is not related to the period in which a bank creates the highest credit in the market. It is a term used to describe a specific situation of depositors withdrawing cash from banks.

Therefore, the correct answer is option 3.

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