What is a bank run and how does it affect the economy?

A bank run occurs when a large number of customers of a bank simultaneously attempt to withdraw their deposits due to concerns about the bank’s solvency. The fear that the bank will run out of cash can create a self-fulfilling prophecy, as customers rush to take their money out, further depleting the bank’s reserves. Bank runs can lead to widespread panic and the collapse of financial institutions, which in turn can cause disruptions to the broader economy. During times of crisis, central banks or governments may intervene to provide liquidity and prevent a systemic collapse by guaranteeing deposits and restoring confidence in the banking system.