To the Extent That There Are Concerns About Moral Hazard

question 120

Multiple Choice

To the extent that there are concerns about moral hazard and adverse selection in a country,

• A)economic growth will be hindered.
• B)there will be more portfolio investment.
• C)there will be more foreign direct investment.
• D)it will be easier to arrange financing for new development projects.

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Definitions:

Market Risk

The risk of losses in investments due to factors that affect the overall performance of the financial markets.

Systematic Risk

The overall impact of market-wide phenomena on the value of investments, as opposed to risks that are specific to a particular investment.

Nondiversifiable Risk

Also known as systematic risk, it refers to the portion of an investment's risk that cannot be eliminated through diversification, affecting the entire market or economy.

Diversifiable Risk

A type of investment risk that can be reduced through diversification of a portfolio across different assets, sectors, or geographical locations.