In Response to the 2008 fiNancial Crisis, the Government Began

question 89

Multiple Choice

In response to the 2008 financial crisis, the government began to bail out banks deemed "too big to fail." Critics of this action argued that this would create the prospect of future bailouts and
Encourage banks to be fiscally irresponsible in the future. This illustrates

• A) the adverse selection problem.
• B) the moral hazard problem.
• C) the principal-agent problem.
• D) logrolling.