A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.

Name: A problem with the too-big-to-fail policy is that it ________ the incentives for ________ by big banks.
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Question

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The too-big-to-fail policy increases the incentives for moral hazard by big banks as they know that the government will bail them out if they fail. This encourages them to take on more risks than they would otherwise, knowing that they will not bear the full consequences of their actions.

A Problem with the Too-Big-To-Fail Policy Is That It ________