The Concept of Adverse Selection Helps to Explain All of the Following

question 42

Multiple Choice

The concept of adverse selection helps to explain all of the following EXCEPT

• A)why firms are more likely to obtain funds from banks and other financial intermediaries,rather than from the securities markets.
• B)why indirect finance is more important than direct finance as a source of business finance.
• C)why direct finance is more important than indirect finance as a source of business finance.
• D)why the financial system is so heavily regulated.

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Definitions:

Quota

A restriction placed on the amount of a product allowed to enter or leave a country.

Amount of Product

The quantity of goods or services available for sale or consumption, often measured in physical units or financial terms.

Leave a Country

Refers to the act of exiting a nation's borders, often in the context of individuals or businesses relocating for social, economic, or political reasons.

Tariffs

Taxes imposed by a government on imported goods or services, aimed at making domestic products more competitive.