Because of the Presence of Asymmetric Information Problems in Credit

question 57

Multiple Choice

Because of the presence of asymmetric information problems in credit markets,an expansionary monetary policy causes a ________ in net worth,which ________ the adverse selection problem,thereby ________ increased lending to finance investment spending.

• A)decline;increases;encouraging
• B)rise;increases;discouraging
• C)rise;reduces;encouraging
• D)decline;reduces;discouraging

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Definitions:

Direct Materials

Raw materials that are directly used in the production of a product and can be easily traced to the finished product.

Conversion Costs

Sum of labor costs and overhead expenses associated with the transformation of raw materials into finished goods.

First-In

Typically part of the phrase "First-In, First-Out" (FIFO), a method used to assign costs to inventory on the basis that the first items entered into inventory are the first sold.

Equivalent Units

A term used in cost accounting to denote a conversion measure that expresses the amount of work done on partially completed units in terms of fully completed units.