6. The chartering process is especially designed to deal with the problem, and regular bank examinations help to reduce the problem. A) adverse selection; adverse selection B) adverse selection; moral hazard C) moral hazard; adverse selection D) moral hazard; moral hazard

How does bank chartering reduce adverse selection problems? Does it always work?

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) diversification

7. Who has regulatory responsibility when a bank operates branches in many countries? A) It is not always clear. B) the WTO C) the U.S. Federal Reserve System D) the first country to submit an application 8. Moral hazard is an important concern of insurance arrangements because the existence of insurance A) provides increased incentives for risk taking. B) is a hindrance to efficient risk taking. C) causes the private cost of the insured activity to increase. D) creates an adverse selection problem but no moral hazard problem. 9. Which of the following is NOT a reason financial regulation and supervision is difficult in real life? A) Financial institutions have strong incentives to avoid existing regulations. B) Unintended consequences may happen if details in the regulations are not precise. C) Regulated firms lobby politicians to lean on regulators to ease the rules. D) Financial institutions are not required to follow the rules. 10. When financial institutions go on a lending spree and expand their lending at a rapid pace they are participating in a A) credit boom. B) credit bust. C) deleveraging. D) market race.

Additional precautions taken by mortgage lending institutions include which of the following: (Select all that apply) Obtaining the current price of the property Ensuring all taxes are paid Establishing the title and legality of the property Reviewing the location of the property Establishing the market value of the property

Which action would a bank most likely take when deciding whether a person should be approved for a loan?A.Requiring the person to take a written test about financial conceptsB.Forcing the person to shut down all other bank accountsC.Checking bank statements to see how much money the person has savedD.Investigating the person's grades in high school and college