Exam 11: The Economics of Financial Intermediation

Prosper.com is a San Francisco-based web site that facilitates peer-to-peer micro lending.If you were going to consider making a loan through Prosper would you be more concerned about adverse selection or moral hazard, and why?

Emerging market economies, compared to industrialized economies, have financial markets that:

The publication, Consumer's Reports, is one tool designed to treat:

Which of the following is not a role of a financial institution acting as a financial intermediary?

The problem of adverse selection created the opportunity for:

Each of the following is an example of a restrictive covenant on a mortgage loan, except:

A bank usually treats the moral hazard problem by using all of the following, except:

Providing stock options to corporate managers was an idea designed to:

Provide an example of how a bank achieves lower cost in making a large loan to a company than could be achieved without the bank.

In a financial market where information is symmetric:

A lender who wants to avoid the problem of adverse selection could:

If diversification is such a good idea for a saver, why do so many people put a lot of their savings in the same bank?

A lender usually knows less about the creditworthiness of a borrower than the borrower does.This is an example of:

Explain why deflation can be so troubling to borrowers and lenders.

Automated teller machines provided by financial intermediaries are an example of:

Since one function of financial intermediaries is to provide liquidity:

Financial markets do not function as well as they could due to:

An unsecured loan is:

Financial institutions, acting as financial intermediaries, perform all of the following, except:

One reason that financial intermediaries exist is that they: