Which Is Not a Measure Instituted to Offset the Moral

question 19

Multiple Choice

Which is not a measure instituted to offset the moral hazard problem created by the FDIC?

• A)Established strict regulations of banks
• B)The creation of the Federal Reserve Bank
• C)Separating banks from other financial institutions
• D)Require financial transactions essential to the economy to remain in banks

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Definitions:

Hidden Characteristic

In economics and contract theory, a hidden characteristic refers to information about a product, service, or individual that is not known beforehand by one of the parties in a transaction, potentially leading to problems like adverse selection.

Asymmetric Information

A situation where one party in a transaction has more or superior information compared to another.

Car Insurance

A contract between a vehicle owner and an insurance company, providing financial protection against physical damage or bodily injury from traffic collisions.

Asymmetric Information

An instance where in a transaction, one entity has higher or more detailed information than another.