Traditionally, the federal government provides disaster relief funds to flood victims so that they can rebuild their homes after a major flood. However, the government has recently denied requests to rebuild some homes that were situated in flood-prone areas. This action represents an attempt to ________ the moral hazard problem associated with building private homes in risky areas.

Question

Quizplus · Accepted Answer

Mitigate means to reduce or alleviate something, which would be an appropriate action to take in response to the moral hazard problem associated with building homes in flood-prone areas. By denying requests to rebuild homes in these areas, the government is trying to reduce the incentive for people to continue building in risky locations and to encourage them to move to safer areas. Enhancing, legalizing, or supporting would not address the moral hazard problem in the same way that mitigating would.

Traditionally, the Federal Government Provides Disaster Relief Funds to Flood