# 205.4 Lesson - bankRun

**Screen:** bankRun

**Headline:** Problems of Fractional Reserve Banking

**Reward:** 2

**Text:** Banks sometimes issued more paper notes than they had deposits, which could cause problems in the economy. If people started to doubt the solvency of a bank, they might rush to withdraw their money all at once before others do. This is called a bank run.

The sudden loss of deposits from the bank run could reveal that the bank was using too much leverage through Fractional Reserve Banking. This could cause a lack of liquidity and bring the whole financial system to a stop.

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## QUIZ

**Question:** What is a potential outcome of banks issuing more paper notes than they held deposits?

**Answer:** A sudden drain of deposits en masse, leading to systemic fears and drying up of liquidity

**Feedback:** masse, leading to systemic fears and drying up of liquidity

**Correct:** true

**Answer:** A nice vacation for everyone

**Feedback:** Sorry, taking a vacation isn't quite the outcome we're looking for here. Better luck next time

**Correct:** false

**Answer:** A sudden increase in the price of gasoline

**Feedback:** Gas prices might fluctuate for a variety of reasons, but this particular scenario doesn't have much to do with it. Try again!

**Correct:** false

<figure><img src="/files/rr7oIywuNk7eRSxKsPtn" alt=""><figcaption></figcaption></figure>


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