If FDIC Tends to Charge Depository Institutions Less Than the Full

question 67

Multiple Choice

If FDIC tends to charge depository institutions less than the full cost of deposit insurance in its risk-based deposit premium system,

• A) the banks will be upset with FDIC.
• B) the risk-based premium system will adequately "tax" the excess risk returns of banks that have made risky investments.
• C) the moral hazard associated with deposit insurance is still present.
• D) the regulator will not have to worry about banks taking excessive risk.

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Definitions:

Normal Standards

Predetermined benchmarks or criteria that are set to measure efficiency or performance levels in various business operations.

Production Difficulties

Challenges or obstacles encountered during the process of manufacturing or producing goods.

Direct Labor Standard

A predefined measure of the amount of labor time that is considered necessary to produce one unit of output.

Cost Standards

Predetermined costs that serve as a benchmark for evaluating the actual performance and budgeting of a company.