DSQ/2/2

1. The financial sector came under intense scrutiny following both the Great Depression and the recent Great Recession. Economic shocks in both recessions reverberated through public and private sector entities. Read a letter by Federal Reserve economists, "Fed Intervention: Managing Moral Hazard in Financial Crises", and then answer the following questions.

1. How do the Federal Reserve economists define moral hazard?
2. What extraordinary actions did the Federal Reserve take in late 2008?
3. How and why does the Federal Reserve attempt to minimize micro moral hazard?

For additional details, please refer to the Research Project Instructions and Rubric document in the Assignment Guidelines and Rubrics section of the course.