One Way for Banks to Reduce the Principal-Agent Problems Associated

question 134

Multiple Choice

One way for banks to reduce the principal-agent problems associated with trading activities is to

• A)set limits on the total amount of a traders' transactions.
• B)make sure that the person conducting the trades is also the person responsible for recording the transactions.
• C)encourage traders to take on more risk if the potential rewards are higher.
• D)reduce the regulations on the traders so that they have more flexibility in conducting trades.

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Definitions:

Shortage

A situation where demand exceeds supply, often leading to rising prices and unmet consumer needs.

Surplus

An excess of income or assets over expenditure or liabilities in a given period, often referring to profit or the amount of goods produced over what is needed.

Price Ceiling

A restriction enforced by the government on the highest price allowable for a product or service.

Price Floor

A legally established minimum price below which a good or service cannot be sold, often set to protect producers or farmers from too low prices.