Considering the Methods Available to the FDIC for Dealing with a Failed

question 39

Multiple Choice

Considering the methods available to the FDIC for dealing with a failed bank, the depositors of the failed bank should:

• A) be indifferent between the two since it really does not matter to them which method is used.
• B) prefer the purchase and assumption method since the deposits over $250,000 will also be protected.
• C) prefer the payoff method because they will have access to their funds earlier.
• D) prefer the payoff method since a lot less paperwork is involved for the depositor.

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Definitions:

Price Elasticity

The measurement of demand's elasticity to price changes for a particular good.

Midpoint Formula

A method used in mathematics to calculate the midpoint, or average, of two points on a line segment.

Price Elasticity

The degree of interplay between a good's demanded quantity and its price movement.

Midpoint Method

The midpoint method is a technique used in economics to calculate the elasticity of a variable by dividing the percentage change in the quantity demanded or supplied by the percentage change in price, using the midpoint between two values as the base of calculation.