Risk Sharing Is Profitable for Financial Institutions Due to

question 69

Multiple Choice

Risk sharing is profitable for financial institutions due to

• A)low transactions costs.
• B)asymmetric information.
• C)adverse selection.
• D)moral hazard.

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Definitions:

Exchange Value

The worth of a good or service as determined by the market, or the amount of goods and services that can be exchanged for it.

Bretton Woods System

An international monetary system established in 1944 that set up fixed exchange rates anchored by the U.S. dollar, which was convertible to gold.

Pegged Exchange Rates

An exchange rate regime where a country's currency value is fixed or tied to another currency or a basket of currencies.

U.S. Dollars

The official currency of the United States, widely used as a benchmark and reserve currency around the world.