The tendency of bankers to take unwarranted risks in making loans because deposits were insured is an example of _____.
A)anchoring bias
B)self-serving bias
C)moral hazard
D)hazard pay
E)banker's lobbying

Question

Quizplus · Accepted Answer

Moral hazard is the tendency to take on more risk because someone else (in this case, the government via deposit insurance) will bear the cost of that risk. The bankers were less cautious in making loans because they knew that the deposits were insured, so if the loans went bad, they wouldn't be fully responsible for the losses.

The Tendency of Bankers to Take Unwarranted Risks in Making