Moral Hazard and Adverse Selection Are Both Examples of

question 15

Multiple Choice

Moral hazard and adverse selection are both examples of

• A) the principal-agent problem.
• B) externalities in consumption.
• C) efficiency in markets.
• D) perfect information.
• E) asymmetric information.

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Definitions:

Gold Standard

A monetary system where a country's currency or paper money has a value directly linked to gold; countries agree to convert currency into a fixed amount of gold.

Fixed Exchange-Rate

A regime under which the government or central bank ties the official exchange rate to another country's currency or the price of gold.

Capital Account

A national account that shows the net change in asset ownership for a country. It includes foreign investments and loans.

Financial Account

A component of the balance of payments that records transactions of financial assets between residents of one country and the rest of the world.