If Banks Experience Higher Costs in Making Loans,they May Decide

question 17

Multiple Choice

If banks experience higher costs in making loans,they may decide to

• A) engage in credit rationing rather than raise interest rates in an attempt to increase adverse selection.
• B) engage in credit rationing rather than raise interest rates in an attempt to not increase adverse selection.
• C) raise interest rates rather than engage in credit rationing in an attempt to decrease adverse selection.
• D) raise interest rates rather than engage in credit rationing in an attempt to eliminate adverse selection.

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Definitions:

Experience Conflicts

When an individual faces opposing demands, desires, or situations, leading to internal or external stress.

Preexisting Schemas

Cognitive structures or frameworks that help individuals organize and interpret information based on prior knowledge and experience.

Assimilation

A cognitive process in Jean Piaget's theory where individuals integrate new information into existing schemas or frameworks of understanding.

Feeling of Meaning

The subjective experience or sensation that one's life or circumstances have purpose and significance.