Banks Use Credit Rationing Rather Than Simply Raising the Interest

question 40

Multiple Choice

Banks use credit rationing rather than simply raising the interest rate charged borrowers with higher default risks because

• A)of fear of adverse selection problems.
• B)of interest rate ceilings in many states.
• C)of fear of offending the loan applicants.
• D)use of credit rationing is encouraged by the Federal Reserve.

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Definitions:

Offered For Sale

The act of making a product, asset, or property available to be purchased by others.

Securities And Exchange Commission

The Securities and Exchange Commission (SEC) is a United States federal agency responsible for regulating the securities markets and protecting investors.

Registration Statement

A registration statement is a set of documents, including financial information and details about an offering, that a company must file with regulatory bodies (like the SEC in the U.S.) before going public or issuing new securities.

Insider Trading

The purchase or sale of securities on the basis of information that has not been made available to the public.