Question

In: Economics

Discuss the ramifications of the FDIC reducing deposit insurance limits to $25,000.

Discuss the ramifications of the FDIC reducing deposit insurance limits to $25,000.

Solutions

Expert Solution

If the insurance amount is reduced to level of $25,000, it is highly likely that the overall deposits would reduce because depositors will now deposit less money in the bank. With lower deposits in the banking system, it may affect the monetary base and the money supply in the economy. this will happen because banks will find themselves short of reserves which can be used as loans. There will be an increase in the rate of interest. In short to medium term this can also damage the growth rate, reducing the level of GDP.

Rahul Sunny answered 1 year ago
Next > < Previous

Related Solutions

Discuss bank panics, and the role of deposit insurance. How does the FDIC handle the resolution...
Discuss bank panics, and the role of deposit insurance. How does the FDIC handle the resolution of a bank that may fail?
What are the arguments for and against deposit insurance such as that provided by the FDIC?
What are the arguments for and against deposit insurance such as that provided by the FDIC?
FDIC deposit insurance covers the depositors of a failed FDIC-insured depository institution dollar-for-dollar
FDIC deposit insurance covers the depositors of a failed FDIC-insured depository institution dollar-for-dollar, principal plus any interest accrued or due to the depositor, through the date of default, up to at least $350,000.TrueFalse
Discuss the limits of autonomy (if any). Ethically evaluate and discuss the ethical ramifications of the...
Discuss the limits of autonomy (if any). Ethically evaluate and discuss the ethical ramifications of the changing definition of death. Critique the role of religion at the end of life debate and how does autonomy fit in.
The Federal Deposit Insurance Corporation (FDIC) raised the insurance limit on bank account deposits from ____...
The Federal Deposit Insurance Corporation (FDIC) raised the insurance limit on bank account deposits from ____ to _____ in ______. A) zero; $25,000; 1932 B) $25,000; $100,000; 1933 C) $100,000; $250,000; 2008 D) $250,000; $1,000,000; 2008 Though an IMF/World Bank study found that ________, the results depend on the ________. A) negative effects of deposit insurance outweighed the positive effects; amount of bank regulation B) positive effects of deposit insurance outweighed the negative effects; size of the bank C) larger...
In his study on the labor hours spent by the FDIC (Federal deposit insurance Corporation) on...
In his study on the labor hours spent by the FDIC (Federal deposit insurance Corporation) on 91 bank examinations, R.J. Miller estimated the following function. lnY=2.41+0.3674lnX1+0.2217lnx2+0.0803lnx3-0.1755D1+0.2799D2+0.5634D3-0.2572D4 (0.55) (0.0477) (0.0628) (0.0287) (0.2905) (0.1044) (0.1657) (0.0787) R2=0.766 Where Y= FDIC examiner labor hours X1= Total assets of bank, x2 total number of offices in bank, x3 ratio of classified loans to total loan for bank . D1=1 if management rating was good D2=1 if management rating was fair D3=1 if management rating...
In his study on the labor hours spent by the FDIC (Federal deposit insurance Corporation) on...
In his study on the labor hours spent by the FDIC (Federal deposit insurance Corporation) on 91 bank examinations, R.J. Miller estimated the following function. lnY=2.41+0.3674lnX1+0.2217lnx2+0.0803lnx3-0.1755D1+0.2799D2+0.5634D3-0.2572D4      (0.55)     (0.0477)       (0.0628)      (0.0287)      (0.2905)    (0.1044)     (0.1657)     (0.0787) R2=0.766 Where Y= FDIC examiner labor hours             X1= Total assets of bank, x2 total number of offices in bank, x3 ratio of classified loans to total loan for bank . D1=1 if management rating was good D2=1 if management rating was fair D3=1 if...
FDIC deposit insurance is generally limited to ________ per depositor per bank. Group of answer choices...
FDIC deposit insurance is generally limited to ________ per depositor per bank. Group of answer choices $50,000 $100,000 $150,000 $200,000 $250,000
1) The Dodd-Frank Act requires that the FDIC restore its Deposit Insurance Fund to a healthy...
1) The Dodd-Frank Act requires that the FDIC restore its Deposit Insurance Fund to a healthy level in a period of a) weeks. b) months. c) years. d) decades. 2) Which of the following will NOT play a role in eliminating the shortcoming of the taxation system, particularly the fact that the tax system taxes nominal return rather than real return? a) Eliminating taxation of interest b) Introducing inflation-indexed bonds c) Taxing only real interest income, not nominal interest income...
True OR False Increasing the deposit insurance limits, opening the Fed’s Discount window to institutions not...
True OR False Increasing the deposit insurance limits, opening the Fed’s Discount window to institutions not previously able to access discount window funds and the Treasury’s purchase of super preferred shares of the Top 10 largest commercial bank was a mult-pronged strategy to mitigate the financial crisis.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT