The Concept of Moral Hazard Was Publicly Discussed in the Context

question 50

Multiple Choice

The concept of moral hazard was publicly discussed in the context of the 2007- 2008 financial crisis because

• A)it was feared that government bailouts of financial institutions would encourage the institutions to continue their risky behaviour.
• B)it was argued that the U.S.government should invoke moral hazard to sustain the financial sector.
• C)it was claimed that moral hazard was necessary to prevent large U.S.financial institutions from going bankrupt.
• D)it was feared that the U.S.government was taking advantage of its special knowledge in the financial markets.
• E)it was feared that government bailouts of financial institutions would reduce competition in financial markets.

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