The Problem of Moral Hazard Has Led

question 24

Multiple Choice

The problem of moral hazard has led

• A) the governments of many developing countries to guarantee repayment of all loans.
• B) to higher growth rates in Latin America.
• C) to excessively speculative investment.
• D) to both privilege and responsibility of creditors.
• E) to stable investments with small and steady expected gains.

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Definitions:

Induced Consumption

The concept that the level of consumer spending increases as disposable income rises, and decreases as disposable income falls, all else being constant.

Induced Consumption

Induced consumption is the portion of consumer spending that increases with an increase in disposable income.

Disposable Income

The finance available to households for expenditures and saving after reducing income taxes.

Disposable Income

Money that households can earmark for spending and saving after income taxes are considered.