If Depository Insurance Exists,bank Managers May Make Riskier Loans Than

question 99

Multiple Choice

If depository insurance exists,bank managers may make riskier loans than they would have otherwise,which is an example of

• A)regulatory lag.
• B)irrational behaviour.
• C)moral hazard.
• D)adverse selection.

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Definitions:

Financial Leverage

Financial leverage refers to the use of borrowed funds to increase the potential return on investment, amplifying both potential gains and losses.

Technological Advantages

Benefits a company gains by utilizing superior technology compared to its competitors, potentially leading to higher efficiency and profit margins.

Equity Account

An account that represents the ownership interest of shareholders in a corporation, reflected in common and preferred shares.

Fixed Costs

Expenses that do not change with the level of production or sales activities, within a relevant period.