Adverse Selection and Moral Hazard Problems Increased in Magnitude During

question 11

Multiple Choice

Adverse selection and moral hazard problems increased in magnitude during the early years of the Great Depression as

• A) stock prices declined to 10 percent of their levels in 1929.
• B) banks failed.
• C) the aggregate price level declined.
• D) a result of all of the above.
• E) a result of A and B of the above.

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Definitions:

Delegation of Duties

The process of assigning specific responsibilities or tasks to another individual, often within an organizational setting.

Promisee

In a third-party beneficiary contract, the party to the contract who owes something to the promisor in exchange for the promise made to the third-party beneficiary.

Third-Party Beneficiary

A recipient of contractual benefits who is not one of the contracting parties; created when two parties enter into a contract with the intended purpose of benefiting a third party.

Creditor Beneficiary

A third party that benefits from a contract made between two other parties, especially in terms of having the right to claim performance or compensation.