Which of the Following Is an Example of Moral Hazard

question 373

Multiple Choice

Which of the following is an example of moral hazard?

• A)a driver is arrested for drunk driving
• B)a pet-sitter being paid to walk a dog for one hour per day only walks the dog for 20 minutes per day
• C)a thief steals a car
• D)All of the above are examples of moral hazard.

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Definitions:

Current Monetary Liability

A short-term financial obligation that is expected to be settled within a year using cash or other monetary resources.

Undiscounted Amount

The total amount of cash flow without adjusting for its present value or interest rates.

Futures Contract

A standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, often on a financial or commodity market.

Hedge Inventory

Hedge inventory involves the use of financial instruments or market strategies to offset potential losses or gains in the inventory's value due to price fluctuations.