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

question 36

Multiple Choice

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

• A) as deregulation opened up more avenues for savings and loans and mutual savings banks to take on more risk.
• 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) because of all of the above.
• E) because of only A and B of the above.

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Definitions:

Legal Equality

The principle that all individuals must be treated equally by the law, without any discrimination.

Assimilate

The process by which individuals or groups absorb and integrate the cultural traditions, language, or behaviors of another group or society.

Tenskwatawa

A Native American religious and political leader of the Shawnee tribe, known as the Prophet, who advocated for a return to traditional ways and resistance against European-American expansion in the early 19th century.

Neolin

A Native American religious prophet who, by preaching pan-Indian unity and rejection of European technology and commerce, helped inspire Pontiac’s Rebellion.