One of the problems with the government's recent bailing out of firms is that it encouraged firms to undertake more risky behavior.

Question

Quizplus · Accepted Answer

When firms know that they will be bailed out by the government in case of failure, they tend to take more risks without worrying about the consequences. This is known as moral hazard, and it can be a problem when the government's actions incentivize bad behavior.

One of the Problems with the Government's Recent Bailing Out