(Solution) - Suppose you are a depositor at Melvin s Bank which has -(2025 Original AI-Free Solution)

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Suppose you are a depositor at Melvin?s Bank, which has the balance sheet shown in Table 10.1A. Deposit insurance does not exist. You originally deposited your money in Melvin?s Bank because its branch locations are more convenient than those of other banks.

a. Suppose you know that Melvin?s other depositors plan to keep their money there. Should you do the same or withdraw your money and deposit it elsewhere?
b. Suppose you know that other depositors plan to make large withdrawals from Melvin?s Bank. What should you do?
c. What do your answers to parts (a) and (b) tell you about the likelihood and causes of bank runs?