Exam 8: An Economic Analysis of Financial Structure

Credit card debt is ________.

One financial intermediary in our financial structure that helps to reduce the moral hazard from arising from the principal-agent problem is the ________.

Nobel prize winner George Akerlof is associated with the "________ problem."

How does a mutual fund lower transactions costs through economies of scale?

Adverse selection is a problem associated with equity and debt contracts arising from ________.

The financial system includes all but the following type of institutions.

Government agencies require that firms that sell securities in public markets adhere to have ________.

Managers (________)may act in their own interest rather than in the interest of the stockholder-owners (________)because the managers have less incentive to maximize profits than the stockholder-owners do.

If you default on your auto loan,your car will be repossessed because it has been pledged as ________ for the loan.

Moral hazard in equity contracts is known as the ________ problem because the manager of the firm has fewer incentives to maximize profits than the stockholders might ideally prefer.

Although debt contracts require less monitoring than equity contracts,debt contracts are still subject to ________ since borrowers have an incentive to take on more risk than the lender would like.

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

Explain how government regulation can lessen asymmetric information problems but not eliminate them using Enron as an example.

Since they require less monitoring of firms,________ contracts are used more frequently than ________ contracts to raise capital.

One reason financial systems in developing and transition countries are underdeveloped is ________.

Which of the following is not one of the eight basic puzzles about financial structure?

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.

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

A ________ is a provision that restricts or specifies certain activities that a borrower can engage in.

A clause in a mortgage loan contract requiring the borrower to purchase homeowner's insurance is an example of a ________.