Public confidence in the commercial banking system has been strengthened by
A) the requirement that commercial banks use their reserves mainly to buy government bonds.
B) bank practices that maintain cash reserves equal to 50 percent of demand deposit liabilities.
C) the fact that all commercial banks are members of the Federal Reserve System.
D) the over 15 percent spread between interest paid to depositors and interest earned on loans.
E) the existence of almost universal insurance on deposits up to $250,000.

Question

Quizplus · Accepted Answer

Universal insurance on deposits up to $250,000 provided by the Federal Deposit Insurance Corporation (FDIC) has strengthened public confidence in the commercial banking system by ensuring that in the event of a bank failure, depositors will still receive their insured funds. This has helped to prevent bank runs and instability in the banking system, which in turn has increased public confidence.

Public Confidence in the Commercial Banking System Has Been Strengthened