Exam 8: An Economic Analysis of Financial Structure

China's reforms to strengthen the financial system includes ________.

For restrictive covenants to help reduce the moral hazard problem they must be ________ by the lender.

Financial intermediaries' low transaction costs allow them to provide ________ services that make it easier for customers to conduct transactions.

Financial intermediaries are able to reduce transaction costs through ________ and ________.

Venture capital firms have been important in developing the ________ sector in Canada.

Explain the problem of asymmetric information, adverse selection and moral hazard, and why these problems are important for the financial system.

A solution to the high transaction costs is to bundle the funds of many investors so that they can take advantage of ________.

Because of the "lemons problem" the price a buyer of a used car pays is ________.

An example of the ________ problem would be if Brian borrowed money from Sean in order to purchase a used car and instead took a trip to Atlantic City using those funds.

The problem of adverse selection helps to explain ________.