What Is Moral Hazard

question 90

Multiple Choice

What is moral hazard?

• A) It refers to the private, self-interested actions that people pursue, which, when taken collectively, lead to a loss in economic surplus.
• B) It refers to the actions people take after they have entered into a transaction that makes the other party to the transaction worse off.
• C) It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.
• D) It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

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Definitions:

Unemployed

The condition of not having employment while being ready to work.

Mass Unemployment

A significant and widespread condition in which a large percentage of the eligible workforce is unable to find employment.

Deflation

An economic condition characterized by a decrease in the price levels of goods and services.

Investment

The action or process of allocating resources, usually money, with the expectation of generating an income or profit.