The "Too Big to Fail" Policy of the Fed, Whereby

question 226

Multiple Choice

The "too big to fail" policy of the Fed, whereby some banks are bailed out if they are in danger of failing because they are too big and could bring the system down, leads to which of the following problems?

• A)adverse selection
• B)externalities
• C)moral hazard
• D)public goods

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Definitions:

Reciprocal Determinism

A concept of Albert Bandura's social cognitive theory that suggests individual behavior, environmental factors, and personal cognitive factors, including beliefs, all interact to shape behavior.

External Events

Occurrences happening outside of an individual that can affect mood, behavior, and perceptions.

Internal Factors

Influences that originate within a person, such as beliefs, values, and personal drive.

Generalized Expectancies

Beliefs or assumptions about how general traits or behaviors are likely to be rewarded or punished in various situations.