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:

Punishment

The imposition of a penalty or discomfort by an authority figure or system in response to an undesired behavior, aiming to decrease its occurrence.

Positive Reinforcement

A strategy in behavior modification that involves the addition of a rewarding stimulus following a desired behavior.

Conditioned Stimulus

A conditioned stimulus is a previously neutral stimulus that, after being associated with an unconditioned stimulus, evokes a conditioned response.

Fear Conditioning

A behavioral paradigm in neuroscience and psychology where organisms learn to predict aversive events, developing a conditioned response to a previously neutral stimulus.