Moral hazard caused by regulation can only be removed from financial transactions if:
A)regulations are regularly revised to keep pace with the changing circumstances of the market.
B)the regulations prevent agency capture.
C)all regulation is self-regulation.
D)participants in the finance industry do not feel protected by the regulations.

Question

Quizplus · Accepted Answer

Moral hazard arises when participants feel protected by regulations, leading them to take on riskier behavior. If they do not feel protected, they are less likely to engage in such behavior.

Moral Hazard Caused by Regulation Can Only Be Removed from Financial