How might unemployment benefits create a moral hazard problem?
What will be an ideal response?
Moral hazard occurs when a principal cannot observe the actions of an agent. When moral hazard is present, someone's actions are their private information and affect the payoffs of others. In the case of unemployment benefits, moral hazard occurs because how hard someone is trying to find a job or what possibilities he is turning down is private information. Generous unemployment benefits imply weaker incentives to look for work and the possibility of a longer duration of unemployment.
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The wage premium in the United States represents a
a. cost of higher education. b. decreasing return to higher education. c. higher return to college education. d. result of declining college attendance since 1973.
Refer to the graph shown. In the graph, if the price level is P0 and the aggregate demand curve is AD0, then the economy is in:
A. a recessionary gap. B. an inflationary gap. C. a short-run equilibrium but not a long-run equilibrium. D. a long-run equilibrium.
An example of odious debt would be debts on the part of a nation that were incurred by a dictator for the well being of his family
Indicate whether the statement is true or false
As demand for MP3 music downloads increases, other things being equal, we can expect
A) a decrease in both the relative price and quantity of MP3 music downloads. B) a decrease in the supply of MP3 music downloads. C) more MP3 music downloads to be produced. D) an excess number of MP3 music downloads in the market.