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:

Socially Toxic

Describes environments or situations that are harmful to psychological well-being, due to factors like bullying, discrimination, or excessive competition.

Psychological Well-Being

The emotional and mental state where an individual feels fulfilled, content, and capable of managing daily stress.

Bullying

Bullying is the use of force, coercion, hurtful teasing, or threat, to abuse, aggressively dominate or intimidate others.

Social Facilitation

The tendency for people to perform tasks better or more efficiently when in the presence of others as opposed to being alone.