Chapter 18: Moral Hazards, Speculation & Market Bubbles Flashcards
1
Q
Define ‘asymmetric information’
A
Where buyers and sellers have different amounts of information, with one group having more information than the other
2
Q
Moral hazard
A
When an economic agent knowingly makes adverse, risky decisions in their own best interest because the cost will be partly borne by other economic agents
3
Q
Define ‘speculation’
A
Buying or selling an asset in the expectation of a future price change and a profit
4
Q
Define ‘market bubble’
A
Occurs when there’s rising demand which drives prices beyond the level that might normally be expected.
5
Q
Cryptocurrency
A
A digital or virtual currency that uses cryptography as security, thereby making it secure
6
Q
Too big to fail
A
- Occurs when the cost to the economy is so great that the government cannot allow it to happen
