Solutions to the Moral Hazard Problem Include

question 53

Multiple Choice

Solutions to the moral hazard problem include

• A)low net worth.
• B)monitoring and enforcement of restrictive covenants.
• C)greater reliance on equity contracts and less on debt contracts.
• D)greater reliance on debt contracts than financial intermediaries.

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Definitions:

Emotional Stability

A personality trait characterized by an individual's consistency in emotional reactions, with a high level meaning less prone to extreme emotional responses and greater resilience to stress.

Role Conflict

A situation in which there are incompatible demands placed upon a person relating to their job or social roles, causing stress or conflict.

Incompatible

Not able to exist or work together without conflict or problems due to differences.

Contradictory

Involving elements or statements that are in opposition and cannot both be true or accepted in the same context.