Central banks have injected moral hazard into global markets through 'bail-outs' and as lenders of last resort, which skews investor behavior toward risky assets because the downside of risk is being underwritten by the central banks. Thus, bubbles occur, and bubbles are bound to burst.

Central banks have injected moral hazard into global markets through 'bail-outs' and as lenders of last resort, which skews investor behavior toward risky assets because the downside of risk is being underwritten by the central banks. Thus, bubbles occur, and bubbles are bound to burst.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter18: Debates In Macroeconomics Over The Rolse And Effects Of Government

Section: Chapter Questions

Problem 8QP

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