The Economics of Money, Banking and Financial Markets 4th Edition by Frederic Mishkin

Exercise 13

This chapter discusses how an understanding of adverse selection and moral hazard can help us better understand financial crises. The greatest financial crisis faced by the United States was the Great Depression of 1929-1933. Go to http://www.amatecon.com/greatdepression.html. This site contains a brief discussion of the factors that led to the Great Depression. Write a one-page summary explaining how adverse selection and moral hazard contributed to the Great Depression.