Because of the weak systems of property rights in many developing and transition economies,the financial system is unable to use collateral effectively worsening the ________ problem.
A)adverse selection
B)moral hazard
C)principal/agent
D)diversification

Question

Quizplus · Accepted Answer

Adverse selection refers to the problem of asymmetric information where one party has information that the other party doesn't, leading to a situation where the party with less information incurs higher risks or costs. In this case, weak property rights systems mean that lenders cannot effectively use collateral to reduce their risk in lending, which increases the likelihood of adverse selection.

Because of the Weak Systems of Property Rights in Many