The government provides insurance for individuals' bank deposits, but requires the banks to pay the premiums for the insurance. Since it is depositors who primarily benefit from the security this insurance provides, the government should take steps to ensure that depositors who want this security bear the cost of it and thus should make depositors pay the premiums for insuring their own accounts.
Banks -> Pay Individual deposits INS
Individual -> Benefit from the INS
Individual wants INS -> Individual should be charged
Which of the following is assumed by the argument?
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(A) Banks are not insured by the government against default on the loans the banks make.
Who should be paying for the INS is the central concern of the argument. Whether banks are insured by the gov against loan default is irrelevant. (A) is out
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(B) Private insurance companies do not have the resources to provide banks or individual with deposit insurance.
We are not worry about private insurance companies. Nowhere is this mentioned in the reasoning. (B) is out
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(D) The government limits the insurance protection it provides by insuring accounts up to a certain legally defined amount only.
This does not address who should pay. Whether the government limits the insurance protection depending on the amount does not affect the conclusion that Individuals should pay. (D) is out.
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(E) The government does not allow banks to offer some kinds of accounts in which deposits are not insured.
So this says that all of the account type must be insured. Okay, but who is going to pay for this? (E) is out.
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(C) Banks do not always cover the cost of the deposit-insurance premiums by paying depositors lower interest rates on insured deposits than the banks would on uninsured deposits.
I skipped reading this answer choice because it was long and hard to grasp at the first sight. Now It is the only remaining. Should It be the correct answer choice? Let's check
Banks -> not cover INS cost by giving lower IR for Insured-Deposit Account > Uninsured-deposit Account
Negation: Banks lower the IR that ID account can earn to cover the cost of INS. So the UD account is now making more Interest Income than ID account. This is saying that the ID account is paying for it, contradicting the conclusion. For this reason, (C) is the answer.