Question

In: Economics

Which of the following is NOT an example of how financial system reduces information costs? Select...

Which of the following is NOT an example of how financial system reduces information costs?

Select one:

Using standardized legal contracts.

Requiring collateral in debt contracts.

Requiring firms to disclose material information

Relying on relationship banking.

Solutions

Expert Solution

Solution: Option-1

Explanation: Information costs refer to the cost in terms of money and time that are spent to obtain information. The standardization of contract terms and reduced risk and information costs improves the willingness of investors on selling and buying the futures contracts. The financial intermediaries, collateral in debt contracts and disclose of the material information increases the information cost

Rahul Sunny answered 2 years ago
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