Which of the Following Is One Unintended Consequence of the Federal

question 103

Multiple Choice

Which of the following is one unintended consequence of the federal bailouts in response to the 2008 financial crisis?

• A)Bondholders will charge equity holders for the risk of this abuse.
• B)Equity holders will credibly commit not to take excessive risk by agreeing to very strong bond covenants.
• C)Lenders to corporations considered "too big to fail" may presume they have an implicit government guarantee,thus lowering their incentives to insist on strong covenants.
• D)Managers who earned large bonuses when their businesses did well did not need to repay those bonuses later when things turned sour.

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Definitions:

Socialization

The process by which individuals learn and adopt the norms, values, and behaviors appropriate to their society.

Naturalistic Theory

A theory that explains phenomena or knowledge in terms of natural causes and processes, as opposed to supernatural or spiritual explanations.

Disharmony

A state of conflict or disconnection among elements that are meant to work together, often leading to dysfunction or imbalance.

Yin/Yang Theory

A fundamental concept in Chinese philosophy and culture, describing how opposite or contrary forces are interconnected and complementary in the natural world.