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Questions and Answers
Which of the following is a reason for the existence of deposit insurance?
Which of the following is a reason for the existence of deposit insurance?
- To allow the FDIC to reorganize failed banks
- To separate good banks from bad banks
- To prevent bank panics
- To ensure that depositors do not lose money in bank failures (correct)
What is the maximum amount that the FDIC will pay off to depositors in case of a bank failure?
What is the maximum amount that the FDIC will pay off to depositors in case of a bank failure?
- $100,000
- $500,000
- $250,000 (correct)
- $1,000,000
What is the problem with the pay off method of handling failed banks?
What is the problem with the pay off method of handling failed banks?
- Depositors may need to pay a fee to receive their payment
- Depositors may receive less than the full amount of their deposit
- Depositors may not receive any payment (correct)
- Depositors may need to wait for a long time to receive their payment
What is the purchase and assumption method used by the FDIC?
What is the purchase and assumption method used by the FDIC?
What is the source of funds for the FDIC to pay off depositors in case of a bank failure?
What is the source of funds for the FDIC to pay off depositors in case of a bank failure?
Which of the following is NOT a concern related to moral hazard in insurance arrangements?
Which of the following is NOT a concern related to moral hazard in insurance arrangements?
What is one potential consequence of FDIC insurance on banks?
What is one potential consequence of FDIC insurance on banks?
Why do depositors and creditors not impose marketplace discipline on financial institutions with FDIC insurance?
Why do depositors and creditors not impose marketplace discipline on financial institutions with FDIC insurance?
What is adverse selection in the context of FDIC insurance?
What is adverse selection in the context of FDIC insurance?
How might a low deductible on automobile collision insurance affect driver behavior?
How might a low deductible on automobile collision insurance affect driver behavior?
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