Briefly explain the meaning of moral hazard

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Immediately following the financial crisis of 2007-08, the federal government assisted companies (for example, Citibank and AIG) that were in financial distress, arguing that they were “too big to fail.” Some economists complained that such support by the government created a “moral hazard” problem. Briefly explain the meaning of “moral hazard” and why it is harmful to an economy.

Reference no: EM131161286

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