A Moral Hazard Situation Arises in the Lender of Last

question 70

Multiple Choice

A moral hazard situation arises in the lender of last resort function because:

• A) a central bank finds it difficult to distinguish illiquid from insolvent banks.
• B) a central bank usually will only make a loan to a bank after it becomes insolvent.
• C) a central bank usually undervalues the assets of a bank in a crisis.
• D) the central bank is the first place a bank facing a crisis will turn.

Identify the characteristics of cultural relativism and its stance on moral requirements.

Analyze Kantian ethics and its view on individual interests versus the greater good.

Recognize the dynamic nature of morality according to cultural relativists and ethical subjectivists.

Understand the virtue ethicist’s perspective on the primary concern of ethical philosophy.

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Definitions:

Apparent Authority

A legal doctrine allowing a third party to rely on the representation of an agent that they have the authority to act on behalf of a principal, even if the agent lacks actual authority.

Actual Authority

The explicit power granted by a principal to an agent to conduct specific transactions or activities on the principal's behalf.

Price Fixing

An illegal agreement among competitors to set, raise, or stabilize prices or competitive terms.

Criminally Liable

The legal responsibility one holds for committing a crime, subjecting them to criminal prosecution and penalties.