Which of the following is NOT an example of moral hazard?Joey borrowed $20,000 from a bank to open a coffee shop but he actually spent the money to buy a fancyrace car.O A man with a family history of high blood pressure buys a health insurance policy.A homeowner with fire insurance on the house smokes in bed.O A bank with a high leverage carries out reckless investment plans.

Answered: Which of the following is NOT an…

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: The Basic Tools Of Finance

Section: Chapter Questions

Problem 5PA

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Which of the following is NOT an example of moral hazard?
Joey borrowed $20,000 from a bank to open a coffee shop but he actually spent the money to buy a fancy
race car.
O A man with a family history of high blood pressure buys a health insurance policy.
A homeowner with fire insurance on the house smokes in bed.
O A bank with a high leverage carries out reckless investment plans.

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Information Asymmetry is an imbalance between two negotiating parties in their knowledge of relevant factors and details. Typically, that imbalance means that the side with more information enjoys a competitive advantage over the other party.

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