Economics of Money, Banking and Financial Markets (12th Edition) (What's New in Economics)
Economics of Money, Banking and Financial Markets (12th Edition) (What's New in Economics)
12th Edition
ISBN: 9780134733821
Author: Frederic S. Mishkin
Publisher: PEARSON
Question
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Chapter 10, Problem 1Q
To determine

The way in which deposit insurance and other types of government safety nets are important to the health of the economy.

Expert Solution & Answer
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Explanation of Solution

Deposit insurance and other types of government safety nets are important to the health of the economy for many reasons. Deposit insurance is the fund to protect the deposits of the individuals in an economy from the loss due to the failure of a financial institution. The safer is the people’s money in an economy, the more they will be confident about savings which will increase the number of deposits and investments in an economy.

Government safety nets are made for various individuals in an economy to protect them from various kinds of losses. More safety nets would mean much safer people in an economy, which will increase the growth and the investments opportunity in an economy. So, it is important for the health of the economy.

Economics Concept Introduction

Introduction:

Deposit insurance refers to the funds devoted to protecting the deposits of individuals in the financial institutions by the government authority or federal deposit.

Insurance is that amount that is kept aside to repay the money of deposits by various individuals at the time of failure of a financial institution.

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