Asymmetric Information Poses Two Important Obstacles to the Smooth Flow

question 62

Multiple Choice

Asymmetric information poses two important obstacles to the smooth flow of funds from savers to investors.They are:

• A)Adverse selection, which arises before the transaction occurs, and moral hazard, which occurs after the transaction
• B)Moral hazard, which arises before the transaction occurs, and adverse selection, which occurs after the transaction
• C)Adverse selection and moral hazard, both of which occur after the transaction
• D)Adverse selection and moral hazard, both of which occur before the transaction

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Definitions:

Intention To Treat

A principle in clinical trials that includes all participants in the groups to which they were originally assigned, regardless of whether they completed the treatment or not, to ensure that the trial results are unbiased and reflect the real-world effectiveness of the treatment.

Causal Effects

The impact of one variable on another variable, determining how changes in one lead to changes in the other.

Policy

A course or principle of action adopted or proposed by an organization or individual, often to guide decisions and achieve rational outcomes.

Causal Relationship

A connection between two variables where a change in one directly causes a change in the other.