The reasons why we need deposit insurance despite the disciplining feature of the uninsured demand deposit contract is are
A) the action of vigilant and informed depositors can be disruptive as they can discover the bank's project choice only with error.
B) there may be systemic elements in the banks' asset portfolios that may lead to a contagion effect among banks.
C) the banks' managers should be protected from making an incorrect project choice.
D) b and c only
E) a and b only
Correct Answer:
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