Multiple Choice
What is the drawback of deposit insurance facility?
A) Even when the DTI is in trouble, the deposit holder has no incentive to run.
B) DTIs are more likely to increase the liquidity risk on their balance sheets.
C) Deposit holder's place in line affects his or her ability to obtain their funds.
D) Deposit insurance does not deter contagious runs and panics.
E) Deposit holders are less likely to panic if there is a perceived bank solvency problem.
Correct Answer:
Verified
Correct Answer:
Verified
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