After watching the PBS documentary, Inside the Meltdown, tell about
something you found interesting in the movie. [One thing to try to pick up from
the video is the notion of moral hazard versus systemic risk. As banks started
collapsing in 2008, economists debated what, if anything, the government
should do. Initially, many economists invoked the notion of Moral Hazard,
which says that the government should not do anything. (If the government
bails out a company then it sends the wrong message to the market.) On the
other hand, as banks started collapsing, many economists moved to the
argument of Systemic Risk, which says that the government should bail out a
bank with many ties to other banks and financial institutions. (If the bank is
allowed to fail, it can create a domino effect, pulling down other banks and
potentially bringing down the entire banking system.) So, think about which of
the two ideas was being when it came to action or lack of action when it came
to the failing of Lehman Brothers, Fannie Mae, and AIG. Note that discussion
do not have to have anything to do with moral hazard and systemic risk.
Pragya Champions Chalice 2024 Prelims & Finals Q/A set, General Quiz
After watching the PBS documentary- Inside the Meltdown- tell about s.pdf
1. After watching the PBS documentary, Inside the Meltdown, tell about
something you found interesting in the movie. [One thing to try to pick up from
the video is the notion of moral hazard versus systemic risk. As banks started
collapsing in 2008, economists debated what, if anything, the government
should do. Initially, many economists invoked the notion of Moral Hazard,
which says that the government should not do anything. (If the government
bails out a company then it sends the wrong message to the market.) On the
other hand, as banks started collapsing, many economists moved to the
argument of Systemic Risk, which says that the government should bail out a
bank with many ties to other banks and financial institutions. (If the bank is
allowed to fail, it can create a domino effect, pulling down other banks and
potentially bringing down the entire banking system.) So, think about which of
the two ideas was being when it came to action or lack of action when it came
to the failing of Lehman Brothers, Fannie Mae, and AIG. Note that discussion
do not have to have anything to do with moral hazard and systemic risk
