Asymmetric information discourages the movement of funds from savers to borrowers, because ________
A) big risks have high payoffs
B) the safe choice is always preferable to the risky choice
C) taking risks is inefficient
D) the loss arising from a failed project must be borne by the borrower, rather than the lender
A
You might also like to view...
All used cars are lemons or peaches. Owners know whether or not their car is a lemon, but buyers do not; that is, the quality of a car is private information. There are many more buyers than sellers
Buyers value a peach at $4,000 and a lemon at $200; owners value a peach at $3,000 and a lemon at $100 . Owners can have their cars inspected for $100 . If they do have their car inspected, they will receive a certificate that shows whether the car is a lemon or a peach. Show that owners of peaches will have their cars inspected and will sell those cars for $4,000 . Show also that the owners of lemons will not obtain a certificate and will sell their cars for $200 .
An actuarially fair return means
A. returns on investments are indexed to the stock market. B. returns on investments have to be positive. C. benefits received, on average, would be equal to the premiums paid. D. premiums for insurance are generally paid by the government.
In economic analysis, which of the following is considered an injection?
a. saving b. taxes c. imports d. exports
What basket of goods is used to construct the CPI?
a. a random sample of all goods and services produced in the economy b. the goods and services that are typically bought by consumers as determined by government surveys c. only food, clothing, transportation, entertainment, and education d. the least expensive and the most expensive goods and services in each major category of consumer expenditures