Moral hazard is a problem in providing deposit insurance because ...

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Moral hazard is a problem in providing deposit insurance because insured banks are
 
  A) more likely to make bookkeeping errors.
  B) overly cautious due to extra regulations adopted by the FDIC.
  C) more likely to provide bank managers with lavish perquisites.
  D) encouraged to take on more risk.

Question 2

A positive, pure income effect can be obtained by
 
  A) increasing the real wage.
  B) increasing the tax.
  C) increasing the dividend.
  D) decreasing leisure.

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Answer to Question 1

D

Answer to Question 2

C