Loan guarantees provided by the government for specific private-sector investments tend to:

Question

Quizplus · Accepted Answer

Loan guarantees provided by the government for specific private-sector investments tend to attract private investors into the specific project by reducing their risk and increasing the likelihood of success. This can lead to increased investment and economic growth, but there is some risk that the government may end up liable for losses if the project fails. Loan guarantees do not necessarily generate high positive returns for the government, increase financial risk faced by private investors, or eliminate the moral hazard problem among investors.

Loan Guarantees Provided by the Government for Specific Private-Sector Investments