Financial intermediaries a) Decrease asymmetric information problems in the financial system b) Increase transactions costs of...
Financial intermediaries
a) Decrease asymmetric information problems in the financial system
b) Increase transactions costs of financial activity.
c) Make it more difficult for borrowers and savers to engage in risk sharing.
d) All of the above.
Homework Answers
Financial intermediaries
Ans
a) Decrease asymmetric information problems in the financial system
Explanation: Financial intermediaries reduce transaction cost of savers and borrowers and also decrease asymmetric information problem by giving solution to allow lending take place.
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Financial intermediaries
a) Decrease asymmetric information problems in the financial
system
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1) A borrower who takes out a loan usually has better information about the potential returns...
1) A borrower who takes out a loan usually has better
information about the potential returns and risk of the investment
projects he plans to undertake than does the lender. This
inequality of information is called
A) moral hazard.
B) asymmetric information. C) noncollateralized risk. D)
adverse selection.
2) If bad credit risks are the ones who most actively seek
loans then financial intermediaries face the problem of
A) moral hazard.
B) adverse selection.
C) free-riding.
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8) Transaction costs are: A) The costs of a trade or financial transaction. B) The costs that savers incur to determine the creditworthiness of borrowers. C)The costs that savers incur to monitor how borrowers use the funds acquired D) All of the above are correct
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1) A borrower who takes out a loan usually has better
information about the potential returns and risk of the investment
projects he plans to undertake than does the lender. This
inequality of information is called
A) moral hazard.
B) asymmetric information. C) noncollateralized risk. D)
adverse selection.
2) If bad credit risks are the ones who most actively seek
loans then financial intermediaries face the problem of
A) moral hazard.
B) adverse selection.
C) free-riding.
D) costly state verification....
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