Asymmetric information poses two important obstacles to the smooth flow of funds from savers to investors. They are:
A. adverse selection and moral hazard, both of which occur after the transaction.
B. moral hazard, which arises before the transaction occurs, and adverse selection, which occurs after the transaction.
C. adverse selection, which arises before the transaction occurs, and moral hazard, which occurs after the transaction.
D. adverse selection and moral hazard, both of which occur before the transaction.
Answer: C
You might also like to view...
The benevolent social planner engages in
A) positive economic analysis. B) normative economic analysis. C) both positive and normative economic analysis. D) neither positive nor normative economic analysis.
Which of the following is an example of adverse selection?
A) Overgrazing of a common piece of land B) Passengers travelling in a subway without a ticket C) A customer buying a defective appliance from a used goods market D) The generation of a harmful chemical during the production of a good
Which is the most important category of Fed assets?
A) securities B) discount loans C) gold and SDR certificates D) cash items in the process of collection
If equilibrium GDP is $800 billion greater than the full employment GDP and the multiplier is 4, how much is the inflationary gap?
What will be an ideal response?