How can specializing in lending help to reduce the adverse selection problem in lending?
What will be an ideal response?
Reducing the adverse selection problem requires the banks to acquire information to screen bad credit risks from good credit risks. It is easier for banks to obtain information about local businesses. Also if the bank lends to firms in a few specific industries they will become more knowledgeable about those industries and a better judge of creditworthiness in those industries.
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The consolidated balance sheet of the all banks in Macroland is presented below: AssetsLiabilitiesCurrency$1,000Deposits$1,000Loans$ 900 Based on this balance sheet the banking system of Macroland can be described as a(n) ________ banking system.
A. 100-percent-reserve B. barter C. fractional-reserve D. government-insured
Which of the following would make a player more inclined to continue into later stages of the Centipede Game rather than ending the game immediately? (Choose all that apply.) a. The subgame-perfect equilibrium is to continue as long as possible because the payoffs eventually get much larger. b. An increase in the chance that your rival has difficulty performing a long chain of deductions
c. An increase in the chance that your rival believes you have difficulty solving a long chain of deductions. d. Altruism toward one's rival.
If farm state legislators support the food-stamp program to aid the urban poor and urban state legislators in turn support farm subsidies, this is an example of:
A. the special-interest effect. B. political logrolling. C. the paradox of voting. D. cost-benefit analysis.
If the supply curve is vertical, then supply is
A. perfectly elastic. B. relatively elastic. C. unit elastic. D. perfectly inelastic.