Some economists are concerned that the financial rescue provided by the TARP will encourage financial investors and firms to take on greater risks in the future.This is an example of:

Question

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Moral hazard refers to the situation in which a party is more likely to take risks because they know they will not bear the full consequences of their actions. In the case of TARP, the bailout may have encouraged financial investors and firms to take on greater risks, as they know that the government will likely bail them out again if they run into trouble. This creates a moral hazard problem, as it incentivizes inappropriate risk-taking.

Some Economists Are Concerned That the Financial Rescue Provided by the TARP