A Key Obstacle Facing Regulators Who Want to Prevent Financial

question 47

Multiple Choice

A key obstacle facing regulators who want to prevent financial institutions from taking excessive risks is the difficulty in:

• A) finding diversified pools of assets to reduce risk.
• B) drawing the line between excessive and appropriate risk taking.
• C) eliminating idiosyncratic risk through diversification.
• D) distinguishing between equity and debt financing.

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Definitions:

Human Aggression

Behavior aimed at causing harm or pain to another person.

Instinct

A natural or innate impulse, inclination, or tendency that guides behavior without the necessity for conscious thought.

Biological Explanations

Theories or reasons that relate behavior, traits, and conditions to biological factors such as genetics and neurochemistry.

Innate Action Tendency

An innate action tendency is a built-in inclination or predisposition to behave in certain ways in response to specific stimuli, often seen as part of evolutionary psychology.