Banks Are Said to Ration Credit When They Refuse to Lend

question 38

Multiple Choice

Banks are said to ration credit when they refuse to lend above a certain interest rate. The purpose of such a policy is to minimize _____ of lending.

• A) adverse selection problems
• B) moral hazard problems
• C) transactions costs
• D) all of the above

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Definitions:

Natural Resources

Assets that are found in nature and are used in the production of goods and services, such as timber, oil, and minerals.