Asymmetric Information Poses Two Important Obstacles to the Smooth Flow

question 30

Multiple Choice

Asymmetric information poses two important obstacles to the smooth flow of funds from savers to investors. They are:

• A) adverse selection, which arises before the transaction occurs, and moral hazard, which occurs after the transaction.
• B) moral hazard, which arises before the transaction occurs, and adverse selection, which occurs after the transaction.
• C) adverse selection and moral hazard, both of which occur after the transaction.
• D) adverse selection and moral hazard, both of which occur before the transaction.

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Definitions:

Interests Outside

Activities and hobbies engaged in apart from professional or main life duties.

Work

Tasks or activities undertaken to achieve a goal, often in exchange for payment; also refers to employment or occupation.

Good Impression

the positive perception or judgment formed by someone based on initial encounters or interactions.

Telephone Interview

A method of conducting an interview over the phone, commonly used in preliminary employment screening or research.