Moral Hazard and Adverse Selection Problems Increased in Prominence in the 1980s

question 20

Multiple Choice

Moral hazard and adverse selection problems increased in prominence in the 1980s

• A)as deregulation required savings and loans and mutual savings banks to be more cautious.
• B)following a burst of financial innovation in the 1970s and early 1980s that produced new financial instruments and markets,thereby widening the scope for risk taking.
• C)following a decrease in federal deposit insurance from $100,000 to $40,000.
• D)as interest rates were sharply decreased to bring down inflation.

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Definitions:

Counterclockwise

A direction opposite to the way in which the hands of a clock move.

Perceptual Equivalence

The phenomenon where stimuli of different physical properties are perceived as identical or having the same meaning by the observer.

Mental Images

Visual representations created by the brain for simulation and recall of experiences, objects, or concepts.

Mental Processes

Internal, covert activities of our minds, such as thinking, feeling, and problem-solving.