Asymmetric information leads to allocational inefficiencies in financial markets.

Name: Asymmetric information leads to allocational inefficiencies in financial markets.
Brand: Quizplus
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Question

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Asymmetric information occurs when one party in a transaction has more or superior information compared to another. This imbalance can lead to adverse selection and moral hazard, causing markets to operate inefficiently as not all parties are making informed decisions.

Asymmetric Information Leads to Allocational Inefficiencies in Financial Markets