When critics of unemployment insurance claim that some of the unemployed are not exerting much
effort to ﬁnd jobs because of the unemployment beneﬁts, they are referring to the moral hazard
problem.

Question

Quizplus · Accepted Answer

The moral hazard problem refers to the situation where individuals may take more risks or be less careful because they are protected from the negative consequences of their actions. In the context of unemployment insurance, critics argue that some individuals may not be motivated to search for jobs or accept lower-paying jobs because they have the safety net of unemployment benefits. This is the moral hazard problem.

When Critics of Unemployment Insurance Claim That Some of the Unemployed