The concept of 'Moral Hazard' in the context of deposit insurance arises because: MCQ with Answer and Explanation

The concept of 'Moral Hazard' in the context of deposit insurance arises because:
A. Banks may take excessive risks knowing that deposits are insured
B. Insurance always reduces risk-taking
C. Depositors monitor banks more intensively
D. Depositors become more careful about bank risk
Answer: Option A
Solution (By JKSSB Mock Tests)
Deposit insurance can create moral hazard by reducing depositors’ incentive to monitor banks and by encouraging banks to take greater risks because the downside is partly borne by the insurer.

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Practice More Economy Set 1 Questions

Question #1
The 'World Bank' publishes which report?
A. World Happiness Report
B. World Economic Outlook
C. World Development Report
D. Global Financial Stability Report

Correct Answer: Option C


Explanation:
World Bank publishes World Development Report.

This question belongs to: Economy GK Economy Set 1
Question #2
The concept of 'wealth effect' in consumption refers to:
A. consumption increasing when wealth increases
B. investment increasing when interest rates rise
C. saving increasing when wealth falls
D. consumption increasing when debt increases

Correct Answer: Option A


Explanation:
The wealth effect says consumption rises when household wealth rises.

This question belongs to: Economy GK Economy Set 1
Question #3
The 'National Payments Corporation of India' operates which of the following?
A. BSE
B. IRDAI
C. NSE
D. UPI and RuPay

Correct Answer: Option D


Explanation:
NPCI operates retail payment systems such as UPI, RuPay, NACH and IMPS.

This question belongs to: Economy GK Economy Set 1