Information asymmetry that exists in lending creates what type of risk for banks? Discuss the ways for a bank to handle or minimize this risk.
What will be an ideal response?
Information asymmetry leads to the problems of moral hazard and adverse selection. In banking this creates credit risk. The credit risk can be minimized by acquiring additional information. This additional information may be in the form of a loan application, a credit report, and credit scoring tools, charging different interest rates based on risk, and by monitoring the borrower after the loan is made.
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The rate of inflation, excluding the effects of food and energy prices, is _____.
(A) Hyperinflation (B) The core inflation rate (C) The price index (D) The wage-price spiral
Recovery in the United States after the Great Recession can be characterized as:
a. Rapid, as U.S. unemployment fell and employment rose. b. Slow to develop, as unemployment fell and employment rose at very sluggish paces. c. Non-existent. After three years, the U.S. economy was in the same position as 2008. d. Mixed, as real GDP grew rapidly, but the unemployment rate and employment rate lagged behind.