(Solved):There have been significant discussions on the government’s fiscal policy during the Great Recession. In particular, many did not like the government’s actions in salvaging the auto industry in pro… View Answer…

 

Question

There have been significant discussions on the government’s fiscal policy during the Great Recession. In particular, many did not like the government’s actions in salvaging the auto industry in providing guaranteed loans to GM and Chrysler. Provide economic reasons for those actions.

One point that was raised regarding salvaging any company, or industry for that matter, was the question of “moral hazard”. Explain.

 

EXPERT ANSWER

When you bail out an industry or company

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