Which of the Following Explains Why Moral Hazard Often Arises

question 61

Multiple Choice

Which of the following explains why moral hazard often arises in the workplace?

• A)Employees do not directly benefit from their effort, but rather their time spent at work.
• B)Employees receive the same compensation no matter the effort put forth.
• C)Employees are hesitant to work their hardest for fear that will become the expectation.
• D)All of these statements are true.

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Definitions:

Credit Default Swap

A financial derivative or contract that allows an investor to "swap" or offset their credit risk with that of another investor.

Loan

A sum of money borrowed that is expected to be paid back with interest.

Asset Securitization

The process of pooling various types of contractual debt such as mortgages, and selling their related cash flows to third party investors as securities.

Investment Choices

The various options available to investors for allocating their funds, including stocks, bonds, real estate, and mutual funds.