How Can the Regulators Reduce the Effects of Moral Hazard

question 63

Multiple Choice

How can the regulators reduce the effects of moral hazard in the absence of depositor discipline?

• A)By allowing DIs to undertake high-risk high-return asset investments.
• B)By basing deposit insurance premiums on a DI's deposit size.
• C)By charging explicit deposit insurance premiums and implicit premiums on DIs.
• D)By exhibiting excessive capital forbearance.
• E)By implementing prompt corrective action capital zones based on rules rather than discretion.

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Definitions:

At Least Two Atoms

A molecule that consists of two or more atoms bonded together, representing the smallest fundamental unit of a chemical compound that can take part in a chemical reaction.

Molecules

The smallest units of a chemical substance that can exist independently while retaining the composition and chemical properties of the substance.

Anatomical Position

The standard position in which the body is standing with feet together, arms at the side, and head, eyes, and palms facing forward, used as a reference point in anatomical nomenclature.

Organs of Digestion

The series of organs responsible for breaking down food and absorbing nutrients, including the stomach, intestines, liver, and pancreas.