________ took place in financial markets during the Great Recession because large financial institutions took excess risks to realize abnormal positive returns in the housing market while they were simultaneously protected from abnormal losses by being "too-big-to-fail."
A)Disintermediation
B)Deregulation
C)Corporate tax reform
D)Moral hazard

Question

Quizplus · Accepted Answer

The situation described in the question is a classic example of moral hazard, which refers to the incentive for an individual or institution to take excessive risks because they know they will be protected from the negative consequences of those risks. In this case, the large financial institutions took on excessive risk in the housing market because they knew they would be bailed out by the government if they suffered large losses, due to their status as "too-big-to-fail."

________ Took Place in Financial Markets During the Great Recession