Moral Hazard and Adverse Selection Problems Increased in Prominence in the 1980s

question 20

Multiple Choice

Moral hazard and adverse selection problems increased in prominence in the 1980s

• A)as deregulation required savings and loans and mutual savings banks to be more cautious.
• B)following a burst of financial innovation in the 1970s and early 1980s that produced new financial instruments and markets,thereby widening the scope for risk taking.
• C)following a decrease in federal deposit insurance from $100,000 to $40,000.
• D)as interest rates were sharply decreased to bring down inflation.

Comprehend the purpose and limitations of organization charts.

Identify the components of a successful organization design and its alignment with organizational strategy.

Understand the impact of external factors such as competitors on organization design.

Recognize the importance of task delegation, culture, power, and job design in organization design.

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Definitions:

Semiannual

Occurring twice a year; pertaining to a period of six months.

Interest Earn

The income received by an investor for lending funds or depositing money in interest-bearing accounts.

Compounded Monthly

This refers to the process where interest is added to the principal balance of a loan or deposit on a monthly basis, allowing the interest to earn interest in subsequent months.

Present Value

The current worth of a future sum of money or stream of cash flows, given a specific rate of return.