1. What are the two methods that governments typically use to avoid bank panics?
2. What is a currency crisis? What is a sovereign debt crisis?
3. In describing the bank panic that occurred in the fall of 1930, Milton Friedman and Anna Schwartz wrote: A contagion of fear spread among depositors, starting from the agricultural areas, which had experienced the heaviest impact of bank failures in the twenties. But such contagion knows no geographical limits.
a. What do the authors mean by a "contagion of fear"?
b. What did bank depositors have to fear in the early 1930s? Do depositors today face similar fears? Briefly explain.
c. What do the authors mean that "such contagion knows no geographical limits"?