Kevin Borrowed Some Money from Hi Interest Bank,telling the Loan

question 24

Multiple Choice

Kevin borrowed some money from Hi Interest Bank,telling the loan officer that he intended to use the money to make repairs to his home.After getting the loan,Kevin and his girlfriend immediately took the money and headed to the nearest riverboat casino for a weekend of gambling and entertainment.

• A) This is an example of adverse selection since banks have difficulty selecting their customers.
• B) This is a typical example of the Condorcet Paradox.
• C) From the given information, Kevin is the principal and his girlfriend is the agent.
• D) From the given information, Hi Interest Bank is the principal and Kevin is the agent.

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Definitions:

Open-Market Operations

Purchases and sales of government securities by the Fed in an effort to influence the money supply.

Government Securities

Government securities are financial instruments issued by a government to raise funds from investors, promising to pay back the borrowed amount with interest, including bonds, treasury bills, and notes.

Fed's Purchase

The buying of securities or assets by the Federal Reserve to inject money into the banking system and stimulate economic activity.

Political Pressure

The exertion of influence by individuals or groups to achieve certain actions or policies from government or other authority figures.