A Big Bank Follows Rash Lending Policies for Short-Term Gains

question 14

Multiple Choice

A big bank follows rash lending policies for short-term gains because it knows that it will be bailed out because it is too big to fail.This behavior illustrates:

• A)the lemon problem.
• B)information asymmetry.
• C)a moral hazard.
• D)the banking paradox.

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Definitions:

Probable Cause

A legal standard that refers to the requirement in criminal law that allows police to make an arrest, conduct a search, or seize property when there are reasonable grounds to believe a crime has been or is being committed.

Shopkeeper's Statute

refers to laws that give retail merchants or their employees the authority to detain suspected shoplifters under certain conditions.

Trespass to Land

An unauthorized physical intrusion onto someone else's property.

Unauthorized

Actions or accesses that are not permitted or approved by the rightful owner or authority.