While many analysts defended the actions taken by the Fed and the Treasury to respond to the financial crisis in 2008,others were critical of these actions.The critics were concerned that by not allowing large firms to fail
A)smaller firms will resent not receiving similar assistance.
B)stockholders and bondholders of these firms were not allowed to receive the proceeds from the sale of assets that would have occurred if the firms had declared bankruptcy.
C)there is an increased likelihood that other firms will engage in risky behavior in the future with the expectation that they will also not be allowed to fail.
D)there will be less competition in the U.S.economy,which could led to higher prices for consumers.

Question

Quizplus · Accepted Answer

Critics argued that rescuing large firms sets a precedent, encouraging other firms to take on excessive risk with the expectation of government bailouts, a concept known as "moral hazard."

While Many Analysts Defended the Actions Taken by the Fed