Business, 14.04.2020 18:44, garciagang0630

If you have studied microeconomics, you may recall a concept called "moral hazard." Moral hazard occurs when an economic agent is incentivized to take risks because some (or all) of the losses that might result will be borne by other economic agents. How might federal deposit insurance, as administered by the FDIC, lead to moral hazard?

A. Insurance gives bank managers incentives to pursue added risks since losses can be shifted to the FDIC. B. Insurance may cause bank shareholders to be less vigilant in monitoring the investment strategies of bank managers.
C. Depositors may pay less attention to the lending practices of banks since their deposits are covered up to some cap.
D. All of the above are plausible.
E. A and B only.

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If you have studied microeconomics, you may recall a concept called "moral hazard." Moral hazard occ...