Explain how approach reduces moral hazard

Reference no: EM13794015

1. What new measures and tools has the Federal Reserve employed in the past 10 years that had not been employed in the past?

2. What could U.S. policymakers have done to prevent the Great Depression or at least re- duce its severity?

3. Many economists argue that a bailout of a fi- nancial institution should protect the institu- tion's creditors from losses but not protect its owners: they should lose their equity. Sup- porters of this idea say it reduces the moral hazard created by bailouts.

a. Explain how approach reduces moral hazard compared to a bailout that protects both creditors and equity holders.

Reference no: EM13794015

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