Lemon laws are an attempt to reduce __________ in used car markets.
a. symmetrical information
b. adverse selection
c. natural selection
d. moral hazard
e. the winner's curse
QUESTION 2In developing countries, it is not true that
a. banks are often viewed with suspicion
b. at the first sign of economic problems, many bank depositors withdraw their funds
c. because banks cannot rely on a continuous supply of deposits, banks cannot make loans for extended periods
d. if financial institutions fail to serve as intermediaries between savers and borrowers, the lack of funds for investment will make growth rates double
e. the credit provided by banks as a percent of total output is one fifth that in high-income countries
QUESTION 3The tendency for the poorest risks to buy health insurance and the tendency of the insured to take more risks with their health are known as
a. moral hazard and adverse selection, respectively
b. the winner's curse and adverse selection, respectively
c. adverse selection and natural selection, respectively
d. adverse selection and moral hazard, respectively
e. the winner's curse and moral hazard, respectively
QUESTION 4A requirement for development is
a. an unreliable system of financial institutions
b. a lack of saving by households and firms
c. low confidence in domestic currency
d. low and predictable inflation that encourages saving
e. None of the answers is correct
QUESTION 5Savers have less incentive to care what their bank is doing with their money because their deposits are federally insured. This is a problem of
a. nominal interest
b. adverse selection
c. moral hazard
d. the winner's curse
e. a positive externality
QUESTION 6The country of Bananaland has an abundant supply of banana trees and therefore must be a modern industrial economy.
a. True
b. False
Quick Reply
