Moral Hazard Is a Problem That Arises When

question 95

Multiple Choice

Moral hazard is a problem that arises when:

• A)people are required to bear the negative consequences of their actions.
• B)people don't have to bear the negative consequences of their actions.
• C)people benefit from the negative actions of others.
• D)government discourages companies from taking risks.

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Definitions:

Speculative Motive

The intention to hold cash or other assets in anticipation of profit from fluctuations in their prices or exchange rates.

Investment Opportunities

Options available to individuals and firms to invest capital with the intent to generate returns.

Bargain Purchases

Acquisitions made at a price significantly below the fair market value of the asset, resulting in an immediate gain for the purchaser.