5. Because _____ depositors are fully insured, they have _____ incentive to withdraw their money and cause their bank to fail. This encourages _______ by bank managers as depositors are protected ______ how the bank actually performs.

6. From this perspective, why might there be too few bank failures as the result of deposit insurance?

A. Banks are prevented from taking on risks that might cause them to fail.

B. Banks are so large now that they are too big to fail.

C. Rather than let banks fail, the FDIC steps in to minimize the amount of money it will have to pay out.

D.Conservative money management on the part of bank managers reduces the risk of failing.

7. In what sense might deposit insurance be considered a federal subsidy for banks?

A. FDIC insurance provides cash subsidies to banks in times of trouble.

B. FDIC insurance is backed by the full faith and credit of the United States government.

C. FDIC insurance is paid for with federal tax dollars.

D. FDIC insurance protects every dollar deposited in a bank.

8. Despite these potential drawbacks, economists and members of Congress overwhelmingly support deposit insurance for all of the following reasons, except:

A. FDIC limits the effect on the economy when a bank fails.

B. FDIC protects every dollar a customer has in a bank.

C. FDIC promotes public confidence in the U.S. financial system.

D. FDIC monitors and addresses risks to deposit insurance funds.