​Moral Hazard Implies That

question 16

Multiple Choice

​Moral hazard implies that

• A)​Insured individuals exercise less care because they have less incentive to do so
• B)Insured individuals exercise more care because they have less incentive to do so
• C)Insured individuals exercise more care because they have more incentive to do so
• D)​Insured individuals exercise less care because they have more incentive to do so

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Definitions:

Deposit Expansion Multiplier

A ratio that determines the maximum amount by which the money supply can increase through the banking system's process of lending out deposits.

Required Reserve Ratio

A regulation that sets the minimum reserves each bank must hold to customer deposits and notes, effectively the same concept as the reserve-requirement ratio but stated differently.

Commercial Banks

Financial institutions that provide services such as accepting deposits, providing business loans, and offering basic investment products.

Government Securities

Financial instruments issued by the government to finance its expenditures, including bonds, notes, and bills, that pay interest to investors.