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partygirl4u59 partygirl4u59
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A year ago
Moral Hazard

Suppose a bank has an opportunity to invest in a risky project. If the project is successful, the bank will earn $7,000; if it is unsuccessful, the bank will lose $14,000. If the project has a 95 percent chance of being successful and the bank is risk-neutral, will the bank make the investment?

Now suppose the government establishes a policy that helps banks that are suffering losses. Under this policy the government will give the bank 50 percent of its losses if the project is unsuccessful. If the bank is risk-neutral, will the bank make the investment?

▸ yes, yes

▸ no, no

▸ no, yes

▸ yes, no
Textbook 
Macroeconomics

Macroeconomics


Edition: 3rd
Authors:
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LaceyCGibsonLaceyCGibson
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A year ago
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partygirl4u59 Author
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A year ago
I appreciate what you did here, answered it right Smiling Face with Open Mouth
amandamraz
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Yesterday
Thanks
missnoname
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2 hours ago
Helped a lot
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