The substantial risks taken by financial intermediaries like Sallie Mae because they are effectively insured are examples of what economists refer to as:
A)sub-prime behavior.
B)asymmetric information.
C)moral hazard.
D)countercyclical policy.

Question

The substantial risks taken by financial intermediaries like Sallie Mae because they are effectively insured are examples of what economists refer to as:
A)​sub-prime behavior.
B)​asymmetric information.
C)​moral hazard.
D)​countercyclical policy.

Quizplus · Accepted Answer

The substantial risks taken by financial intermediaries like Sallie Mae because they are insured is an example of moral hazard. This refers to the tendency of insured parties to take on more risk than they otherwise would because they are protected from the full consequences of their actions. This behavior is often seen in the financial industry and can lead to increased volatility in the market.

The Substantial Risks Taken by Financial Intermediaries Like Sallie Mae