What is a Moral Hazard problem?

Question

26 Oct 2021

Answer :

Word Count : 337

The financial crisis of 2007 brought many adverse trends in the banking sector globally. One such trend was what we call as the moral hazard problem. Here, the banks have taken excessive risks. They knew that even if the bank fails as a result of excessive risk taking, rehabilitating such a big bank will be done by the government and the central bank to avoid adverse effect on _____ ________ ________ ___ _________ ______ _____ ________ _____.
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