The problem of moral hazard exists when:
A. a bank is solvent but many of its assets are illiquid.
B. agencies like the Fed act based on politics rather than sound economics.
C. the failure of one financial institution can lead to the failure of other institutions.
D. people or institutions, who are insured, tend to take on too much risk.
Ans: D. people or institutions, who are insured, tend to take on too much risk.
You might also like to view...
Draw a demand curve and label it D1. On the graph, illustrate an increase in demand and a decrease in demand, and label the curves D2 and D3, respectively. Starting on demand curve D1, explain the shift that would result from each of the following events:
a. an increase in income and the good is a normal good b. an increase in income and the good is an inferior good c. a decrease in the price of a substitute good d. a decrease in the price of a complementary good e. an increase in the taste for the good f. a decrease in population g. an increase in the expected future price of the good
The coefficient of determination (R2) decreases when an independent variable is added to a multiple regression model.
Answer the following statement true (T) or false (F)