Government bailouts of failing businesses, like banks during the 2008 financial crisis, will tend to reduce the motivation among entrepreneurs to make prudent decisions in dealing with business risk.

Question

Quizplus · Accepted Answer

Government bailouts can create moral hazard, where businesses take on excessive risks believing they will be rescued if things go wrong, thus reducing the incentive to make prudent decisions.

Government Bailouts of Failing Businesses, Like Banks During the 2008