A lesson of the Enron collapse is that government regulationA) always fails.B) can reduce but not eliminate asymmetric information.C) increases the problem of asymmetric information.D) should be reduced.

1. The "lemons problem" exists because ofA) transactions costs.B) economies of scale.C) rational expectations.D) asymmetric information.2. A lesson of the Enron collapse is that government regulationA) always fails.B) can reduce but not eliminate asymmetric information.C) increases the problem of asymmetric information.D) should be reduced.3. Solutions to the moral hazard problem includeA) low net worth.B) monitoring and enforcement of restrictive covenants.C) greater reliance on equity contracts and less on debt contracts.D) greater reliance on debt contracts than financial intermediaries.4. Because of the weak systems of property rights in many developing and transitioneconomies, the financial system is unable to use collateral effectively worsening the________ problem.A) adverse selectionB) moral hazardC) principal/agentD) diversification5. A debt contract is incentive compatibleA) if the borrower has the incentive to behave in the way that the lender expects and desires,since doing otherwise jeopardizes the borrower's net worth in the business.B) if the borrower's net worth is sufficiently low so that the lender's risk of moral hazard issignificantly reduced.C) if the debt contract is treated like an equity.D) if the lender has the incentive to behave in the way that the borrower expects and desires.6. Property that is pledged to the lender in the event that a borrower cannot make his or herdebt payment is calledA) collateral.B) points.C) interest.D) good faith money.7. Collateralized debt is also known asA) unsecured debt.B) secured debt.C) unrestricted debt.D) promissory debt.8. A clause in a mortgage loan contract requiring the borrower to purchase homeowner'sinsurance is an example of aA) proscriptive covenant.B) prescriptive covenant.C) restrictive covenant.D) constraint-imposed covenant.9. The current structure of financial markets can be best understood as the result of attemptsby financial market participants toA) adapt to continually changing government regulations.B) deal with the great number of small firms in the United States.C) reduce transaction costs.D) cartelize the provision of financial services.10. Financial intermediaries develop ________ in things such as computer technology whichallows them to lower transactions costs.A) expertiseB) diversificationC) regulationsD) equity

What steps can the government take to reduce asymmetric information problems and helpthe financial system function more smoothly and efficiently?

Which one of the following measures of the Central bank would not lead to reduction of money supply?A.Imposing regulations to increase minimum reserve ratio of the banksB.Purchasing of government bonds from banksC.Selling of government bonds to the publicD.Increasing of cash rate (Policy rate)

Which of these statements do you agree with the most? (select one)All economic activity (trade and production of goods, services, and labor) should be directly controlled by the government.Parts of the economy should be entirely controlled by the government (such as energy, manufacturing, or transportation) in addition to widespread regulationGovernment should encourage the growth of specific industries that it deems important to the national economy, in addition to widespread regulationMost economic activity should remain unregulated, but the government should still step in to prevent monopolies and protect labor.All market activity should be free and unregulated, and borders should be open for the trade of goods, services, and labor.

Which of the following are disadvantages of outsourcing?Loss of control over business processesIssues of turnaround timePotential loss of sensitive dataAll of the above