Question

Creation of the FDIC encouraged reluctant depositors to put their money into the banking system.a) Aside from the benefit of reducing the probability of bank runs, what other positive impact has this policy had in the performance of the overall economy?b) How could higher deposit insurance premiums for banks with riskier assets benefit the economy?

Answer 1

Answer and Explanation:

a) Due to greater coverage of security of the deposits,depositors were not reluctant to deposit their money into the banking system. This has led to greater availability of funds in the economy. The money is available for greater public use. Infrastructure projects and economic projects run with the help of money available in the economy. Moreover companies are able to get funds for greater operations which brings higher benefits to the economies.