Moral Hazard Problems Increased in Prominence in the 1980s

question 102

Multiple Choice

Moral hazard 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:

Declared

Stated or made known officially or publicly.

Unit Of Account

A standard numerical monetary unit of measurement of the market value of goods, services, and other transactions.

Function

In mathematics, a relation between a set of inputs and a set of permissible outputs with the property that each input is related to exactly one output.

Durable

Refers to goods that are designed to last and not wear out quickly, often used in contrast to consumable goods.