All of the Following Are True About Deposit Insurance Except

question 35

Multiple Choice

All of the following are true about deposit insurance except:

• A)Depositors do not need to involve themselves with the risk taking by bank managers
• B)The deposits of a bank customer are insured up to some stated maximum value
• C)There is a creation of potential moral hazard by bank managers
• D)It has not been successful in eliminating bank runs and financial crises

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Definitions:

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one additional unit of a good or service.

Demand Curve

A graphical representation of the relationship between the price of a good and the quantity demanded by consumers, typically downward sloping.

Competitive Industry

An industry characterized by many firms producing similar goods or services, where no single firm has a dominant market share.

Market Price

The existing rate at which an asset or service is available for buying or selling in the market.