The Government Safety Net Creates ________ Problem Because Risk-Loving Entrepreneurs

question 59

Multiple Choice

The government safety net creates ________ problem because risk-loving entrepreneurs might find banking an attractive industry.

• A)an adverse selection
• B)a moral hazard
• C)a lemons
• D)a revenue

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Definitions:

Trading Securities

Financial instruments that are purchased and held primarily for selling them in the near term, with the objective of generating profits on short-term price differences.

Available-For-Sale Securities

Debt or equity securities not classified as held-to-maturity or trading securities, measured at fair value with changes recognized in other comprehensive income.

Realized Gain

is the profit made from selling an asset at a higher price than its purchase cost, officially recognized once the transaction is completed.

Fair Value

The value obtained for disposing of an asset or incurred in transferring a liability during a regulated deal among market entities on the date of measurement.