Because of the Problems of Adverse Selection and Moral Hazard

question 221

Multiple Choice

Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund

• A) make loans to the riskiest nations so that private investors will not be tempted to take a risk.
• B) loan only to countries that have free elections.
• C) not make loans to risky nations because there is a high demand for funds from safer nations.
• D) impose tougher preconditions on borrowers.

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Definitions:

Empirical Formula

The simplest ratio of the elements in a compound that gives the relative number of atoms of each element.

Molecular Formula

A notation that shows the number and type of atoms in a molecule, without indicating how they are connected.

Elemental Analysis

A method of measuring the relative amounts of each element within a chemical sample.

Empirical Formula

The simplest positive integer ratio of atoms present in a compound, not providing structural information but indicating the proportion of elements.