Which of the Following Has Been a Problem Faced by the FDIC

question 309

Multiple Choice

Which of the following has been a problem faced by the FDIC in its provision of federal deposit insurance?

• A) Moral hazard arising from the tendency for the highest-risk banks to be those most interested in obtaining deposit insurance in the first place
• B) Adverse selection arising from the tendency for banks to take on more risk after they receive deposit insurance
• C) Moral hazard arising from the tendency for banks to take on more risk after they receive deposit insurance
• D) A relatively low number of bank failures each year, which has reduced the need for deposit insurance

---

Definitions:

Expected Utility

A theory or calculation that aims at finding the utility expected from an uncertain prospect by considering all possible outcomes, their probabilities, and their respective utilities.

Standard Deviation

A statistical measurement that represents the dispersion or variability of a set of data points or values from the mean.

Mean

A measure of central tendency in statistics, calculated by dividing the sum of all values in a set by the number of values.

Risk-Free Asset

An investment that is expected to return its original investment value without any loss, typically with low returns.