Final answer:
It is false that the Panic of 1819 increased American people’s faith in the Second Bank of the United States. The Panic led to a loss of public confidence in the banking system. The quantity of loans made and received can increase due to a rise in either the demand for loans or the supply of loanable funds.
Step-by-step explanation:
It is false that times of financial uncertainty cause an increase in the overall demand for money. The concept that financial uncertainty increases the money demand is predicated on the idea that people wish to hold liquid assets during uncertain times, which can be true. However, the statement related to the Panic of 1819, which suggests that this event increased the American people's faith in the Second Bank of the United States, is false. The Panic actually shook public confidence in the banking system, including the Second Bank of the United States.
The relationship between fear, uncertainty, and bank stability is a complex one. Bank runs occur when many depositors withdraw their money simultaneously due to fears of a bank's potential failure. If a bank experiences a bank run, it may indeed fail if it cannot meet the demands of withdrawing depositors because banks typically do not hold all of their deposits in reserve.
During economic uncertainty, banks may become more cautious about lending for fear that borrowers will be unable to repay loans. An increase in the quantity of loans made and received can be driven by either a rise in demand for loans or a rise in the supply of loanable funds, not typically due to decreased demand or supply.