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Chapter 15: Q. 15.5- Learning Objectives (page 322)

Explain the essential features of federal deposit insurance.

Short Answer

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As of 2020, the Federal Deposit Insurance Corporation (FDIC) will protect deposits up to250,000 per depositor if the institution is a member business. Checking and savings accounts, certificates of deposit, money market accounts, revocable and irrevocable trust accounts, and employee benefit plans are all covered by the FDIC.

Step by step solution

01

Importance of Federal deposit Insurance.

The Federal Deposit Insurance Corporation is a non-profit organization that insures bank accounts and other assets in the United States in the event that financial institutions collapse. The FDIC was created to give consumers more trust in the health and well-being of the nation's financial system.

02

Features of Federal Deposit Insurance.

Premiums for depository institutions are calculated depending on the value of their deposits, with monies held in reserve in the event of a failed bank, allowing depositors to be reimbursed.

People believe they will be unable to utilize it to exchange goods and services in the future.

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Most popular questions from this chapter

The Federal Reserve purchases 1 million in U.S. Treasury bonds from a bond dealer, and the dealer's bank credits the dealer's account. The reserve ratio is 15percent. Assuming that no currency leakage occurs, how much will the bank lend to its customers following the Fed's purchase?

Even though the federal government requires depository institutions to contribute premiums to the FDIC, who ultimately has to provide sufficient funds if the FDICruns out of cash? (Hint: The FDICborrowed funds from the U.S. Treasury in 1991and 2009.)

Determine the maximum potential extent that the money supply will change following a Federal Reserve monetary policy action.

Which function of money is most closely related to the "record-keeping" idea? Explain your reasoning.

During the 1945-1946 Hungarian hyperinflation, when the rate of inflation reached 41.9quadrillion percent per month, the Hungarian government discovered that the real value of its tax receipts was falling dramatically. To keep real tax revenues more stable, it created a good called a "tax peng艒," in which all bank deposits were denominated for purposes of taxation. Nevertheless, payments for goods and services were made only in terms of the regular Hungarian currency, whose value tended to fall rapidly even though the value of a tax peng枚 remained stable. Prices were also quoted only in terms of the regular currency. Lenders, however, began denominating loan payments in terms of tax peng枚s. In what ways did the tax peng枚 function as money in Hungary in 1945 and 1946?
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