3 questions on "the meaning of money - bank regulation - deposit Insurance"

What does the depositor insurance actually pay?
  • A maximum amout upto 100,000
  • per depsoitor
  • per insure categor
    • chequing ,
    • savings,
    • term deposits with maturity less years.
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What do we call the guarantee by the federal government that depositors will be paid even if the bank cant come up with the funds up to a maximum amount per account?
We call the deposit insurance
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What is the other function of the insurance? How?
  • It also eliminates the main reason for banks runs.
  • since depositors know their funds are safe even if the banks fails, they have no incentive to rush to pull them out because of a rumour that the banks is in trouble
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