Banks in Developing Economies Are Less Willing to Lend to Small

question 19

Multiple Choice

Banks in developing economies are less willing to lend to small firms because:

• A)of higher loan default rates.
• B)interest rates charged cover transaction costs.
• C)of lower adverse selection.
• D)of lower moral hazard.

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Definitions:

Depreciation

Accounting method of allocating the cost of a tangible or physical asset over its useful life, reflecting wear and use over time.

Indirect Business Taxes

Taxes levied on goods and services rather than on income or profits, such as sales tax or value-added tax, ultimately passed on to consumers in the form of higher prices.

National Income

The total amount of money earned within a country, including wages, rent, interest, and profits.

GDP Deflator

A metric that tracks the price points of all newly produced domestic final goods and services, aimed at transforming nominal GDP into real GDP.