Which of the following will tend to socialize losses and privatize gains?

Question

Quizplus · Accepted Answer

Government guarantees to private investors that they will get their money back even if the company fails can socialize losses because the government is essentially providing insurance against failure. This can encourage private investors to take greater risks because they are not fully bearing the consequences of their actions, and if the investment fails, the government will bear some or all of the losses. On the other hand, if the investment is successful, the gains will be privatized and go to the investors.

Which of the Following Will Tend to Socialize Losses and Privatize