Research suggests that people who feel protected from a specific type of risk have a decreased tendency to act in a way calculated to avoid that risk.

That means in simple words that those entrepreneurs who are protected from a certain economic risk tend to avoid it because, maybe, the legislation is clear and they do not ahead what they risk if they conduct in a such risky way

Therefore, to have a healthy economy, it seems prudent to have bankruptcy provisions that will adequately protect people against the financial catastrophe that can result from financial risk-taking.

Have the provisions surely help to achieve our goal

A. The willingness of people to take significant financial risks with potentially catastrophic consequences is conducive to a healthy economy.

This is correct because if we do know the risks, and people knows what they risk in wrongdoing, and as a consequence avoid doing or take those risks...then the economy overall is better and safe and healthy

B. Spending tax money to protect citizens who use their money unwisely is unlikely to induce more people to use money unwisely.

spending money is NOT in the argument

C. Some people will not take financial risks with potentially catastrophic consequences even if they feel adequately protected by bankruptcy provisions.

this is not for sure. We do not know ABSOLUTELY or in an absolute sense people will not take risks even if they know the consequences

D. People who suffer financial disaster due to events that were not easily foreseeable are not to blame for the disaster.

nothing about foreseeable risks or blaming or not. we are talking about tendency not what is for sure or not will happen

E. To be conducive to a healthy economy, bankruptcy provisions should protect people only from risk that arises from business ventures.

we talk about risks in general and that the provisions could help in a specific case of bankruptcy but the bankruptcy is supposed to be for all kind of businesses and NOT ONLY for venture capital

Hope this helps