When a financial institution is deemed too systematically important to go under, it is ________. This leads to ________.
A) a monopoly; above-marginal cost pricing
B) too big to fail; moral hazard
C) an "umbrella" bank; less competition
D) a bank-holding company; adverse selection
E) an investment bank; nationalization

Question

Quizplus · Accepted Answer

When a financial institution is deemed too systematically important to go under, it is referred to as "too big to fail". This leads to moral hazard, as the institution may engage in risky behavior knowing that if they fail, they will be bailed out by the government.

When a Financial Institution Is Deemed Too Systematically Important to Go