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daretodream
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Bank depositors in the US are all financially protected against bank failure because the govenment insures all individuals' bank deposits. An economist argues that this insurance is partly reponsible for the the high rate of bank failure, since it removes from depositors any financial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.
The economist's argument makes which of the following assumption?
1. Bank failures are caused when big borrowers default on loan repayments.
2. A significant proportion of depositors maintain accounts at several different banks
3. The more a depositor has to deposit, the more carefully he or she tends to be in selecting a bank
4. The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
5. Potential depositors are able to determine which banks are secure against failure.
The economist's argument makes which of the following assumption?
1. Bank failures are caused when big borrowers default on loan repayments.
2. A significant proportion of depositors maintain accounts at several different banks
3. The more a depositor has to deposit, the more carefully he or she tends to be in selecting a bank
4. The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
5. Potential depositors are able to determine which banks are secure against failure.
