One Way of Describing the Solution That High Net Worth

question 32

Multiple Choice

One way of describing the solution that high net worth provides to the moral hazard problem is to say that it

• A)collateralizes the debt contract.
• B)makes the debt contract incentive compatible.
• C)state verifies the debt contract.
• D)removes all of the risk in the debt contract.

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Definitions:

Market Value

The current price at which an asset or service can be bought or sold in the marketplace.

Real GDP

A measure of a country's economic output adjusted for price changes (inflation or deflation), reflecting the true value of goods and services produced in a given year.

GDP Deflator

An economic metric that converts output measured at current prices into constant-dollar terms to remove the effect of inflation.

Per Capita Real GDP

An economic measure that divides the real gross domestic product by the total population, indicating the average economic output per person, adjusted for inflation.