Why do higher interest rates increase adverse selection problems in the loan market?
A) Higher interest rates reduce the gains from economies of scale.
B) As interest rates rise, the creditworthiness of the average loan applicant declines.
C) Higher interest rates reduce information problems in the loan market.
D) At higher interest rates fewer investment projects are profitable.
B
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All of the following are possible consequences of noise traders EXCEPT
A) increased volatility in the financial market. B) asset prices differing from fundamental values. C) herd behavior contributing to speculative bubbles. D) reduced volatility of asset prices.
Direct controls
A. have not been tried in practice, but work in theory. B. have been the main instrument used by the United States when dealing with polluting activities. C. achieve more success than pollution charges. D. achieve more success than pollution allowances.