Question

What does it mean to describe deposit insurance as undermining market discipline​? Because ▼ most few depositors are fully​ insured, they have ▼ strong little incentive to withdraw their money and cause their bank to fail. This encourages ▼ conservative investing risk-taking by bank managers as depositors are protected ▼ regardless of based on how the bank actually performs.

Answer 1

Answer:

most

little

risk taking

regardless of

Explanation:

The FDIC insures the deposits of depositors.

The Federal Deposit  Insurance Corporation (FDIC) was established after the great depression. Bank run was attributed to be one of the causes of the great depression. The FDIC increases confidence of depositors in banks because they insure the deposit of bank customers. In the case a bank fails, customers are assured that they would not lose their monies deposited

Because banks knows that the deposit of customers are insured, it increases their risk taking. this is known as adverse selection