Financial intermediaries reduce the problems in lending associated with information asymmetries by all of the following except:

Question

Quizplus · Accepted Answer

Charging high interest rates does not necessarily reduce information asymmetries, as it does not address the issue of assessing creditworthiness or monitoring loan recipients. Instead, it may discourage all borrowers, including those who would use the funds responsibly. Collecting standardized information, screening applicants, and monitoring loan recipients all help to reduce information asymmetries by providing lenders with better information and reducing their risk of lending to risky or untrustworthy borrowers.

Financial Intermediaries Reduce the Problems in Lending Associated with Information