Market Failure in the Financial Sector 4.4.2 Flashcards
1
Q
What are the different types of market failure in the financial sector
A
Asymmetric Information
Speculation and Market bubbles
Negative externalities
Moral Hazard
Market Rigging
2
Q
What is speculation and bubbles refer to 2008 financial crisis
A
Bankers speculate houses would increase so gave subprime mortgages out increasing demand for houses inflating the price of them too much until crash
3
Q
Define Moral hazard
A
Someone else bears consequences of risky behaviour - Bailouts
4
Q
Define Market rigging
A
Firms unfairly try to control prices which distorts the price mechanism
