Explain the Concept of Moral Hazard. Give an Example

question 119

Essay

Explain the concept of moral hazard. Give an example.

---

Definitions:

Monetarist

An economist who holds the belief that variations in the money supply have major influences on national output in the short run and the price level over longer periods.

Rational Expectations

Rational Expectations is an economic theory suggesting that individuals make decisions based on their rational outlook, available information, and past experiences, accurately forecasting future economic conditions.

Classical

An economic theory that emphasizes free markets, minimal government intervention, and the belief in self-regulating nature of markets.

Equation of Exchange

A fundamental equation in monetary economics reflecting the relationship between money supply, its velocity, price level, and an index of expenditures.