While Deposit Insurance Was Designed to Make the Banking Industry

question 136

Multiple Choice

While deposit insurance was designed to make the banking industry more stable,it contributed to the banking crisis of the 1980s because:

• A)the FDIC only insured commercial banks.
• B)the ceiling on insured deposits was too low.
• C)too many banks were insufficiently insured.
• D)depositors became too complacent about the risks that the banks were taking.
• E)unsafe banks were "kicked out" of the deposit insurance system.

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Definitions:

Standard Deviation

A statistical measure that quantifies the amount of variation or dispersion of a set of data values, often used to gauge the risk associated with a certain investment or portfolio.

Probability

A measure of the likelihood of a specific event or outcome occurring, expressed as a number between 0 and 1.

Growth Stock

A stock from a company that is expected to grow at an above-average rate compared to other companies in the market, often characterized by high price-to-earnings ratios.

Risk Levels

The degree of uncertainty and/or potential financial loss inherent in an investment decision or policy.