Which of the following can solve the problem of moral hazard that arises because of the provision of unemployment benefits?
A) An increase in the period covered
B) Restrictions on the amount claimed
C) An increase in the amount provided as benefit
D) A high premium

Question

Quizplus · Accepted Answer

Restrictions on the amount claimed can help reduce the moral hazard problem because it disincentivizes individuals from purposely remaining unemployed just to receive benefits. An increase in the period covered or the amount provided as benefit may actually exacerbate the moral hazard problem by providing individuals with more incentive to remain unemployed. A high premium may discourage individuals from accepting unemployment insurance altogether, leading to underprotection of workers.

Which of the Following Can Solve the Problem of Moral