What happens when banks begin to go out of business because they lack the gold and silver to give depositors?

• A. Bank holidays
• B. Gold rush
• C. Panic of 1837
• D. Great Recession

Answer: (C)

When banks can’t back deposits with gold or silver, trust in the financial system collapses and a bank panic spreads as people rush to withdraw their money. In the Jackson era, this dynamic helped fuel a major crisis known as the Panic of 1837. Policies like requiring gold and silver for public land purchases reduced the money in circulation, banks failed, credit froze up, and widespread business losses followed, leading to a deep economic downturn with unemployment and hardship.

The other options don’t fit the scenario. A bank holiday is a temporary shutdown used to slow runs during crises, not the crisis itself. A gold rush describes a rush of people seeking gold, not a financial collapse. The Great Recession refers to the late-2000s financial crisis, far earlier and driven by modern mortgage and banking failures rather than specie shortages from the Jackson era.