Bank depositors in the United States are all financially protected against bank failure because the government insures all individuals' bank deposits. An economist
argues that this insurance is partly responsible for the high rate of bank failures, since it removes from depositors any finan-cial incentive to find out whether the bank that holds their money is secure against failure. If depositors were more selective, then banks would need to be secure in order to compete for depositors' money.
's argument makes which of the following assumptions?
A Bank failures are caused when big borrowers default on loan repayments.
B A significant proportion of depositors maintain accounts at several different banks.
C The more a depositor has to deposit, the more careful he or she tends to be in selecting a bank.
D The difference in the interest rates paid to depositors by different banks is not a significant factor in bank failures.
E Potential depositors are able to determine which banks are secure against failure.