When the Government Provides Loan Guarantees and in Effect "Socializes

question 273

Multiple Choice

When the government provides loan guarantees and in effect "socializes losses and privatizes gains" of a project or firm, it can lead to a

• A) moral hazard problem among investors.
• B) regulatory capture problem.
• C) principal-agent problem within the firm.
• D) limited and bundled choice problem.

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Definitions:

Test Statistic

A value calculated from sample data during a hypothesis test. It's used to assess the evidence against the null hypothesis.

Chi-squared Distributed

Refers to a statistical distribution that is used to assess the goodness-of-fit of observed data with theoretical expectations under the null hypothesis.

Normal Distribution

A bell-shaped distribution curve which is symmetric about the mean, showing that data near the mean are more frequent in occurrence than data far from the mean.

Variance

A measure of the dispersion indicating how far individual numbers are from the mean.