________ encourage banks to ________, which ________.
A) Loans; increase lending; lowers market liquidity
B) Increased capital requirements; take more risk; leads to future bank bailouts
C) Increased leverage ratios; take less risk; strengthens the banking industry
D) Lower return on assets; hold more cash; increases the "lemon" problem
E) Bailouts; take more risk; worsens the moral hazard problem

Question

Quizplus · Accepted Answer

Bailouts encourage banks to take more risk, which worsens the moral hazard problem by creating an expectation that they will be rescued if their risky bets fail.

________ Encourage Banks to ________, Which ________

Encourage Banks to , Which