Question

2-Which of the following is NOT a reason that people tend to deposit their funds with banks rather than lend their funds directly to other​ individuals?

A.asymmetric information problems

B.moral hazard problems

C.asset aversion problems

D.adverse selection problems

3-Possession of information by one party in a financial transaction but not by the other party is

A.symmetric information.

B.financial intermediation.

C.informational hazard.

D.asymmetric information.

6-What would cause a bank​ run?

A.Borrowers feel that they are being charged too high of an interest rate on their loans.

B.Depositors feel that the bank does not have sufficient assets to cover their deposits.

C.Bank managers choose to hold more excess reserves.

D.Depositors feel that they are earning too low of a return on their deposits.

9-If Maria buys a latte at​ Starbucks, her money serves as a

A.store of value.

B.medium of exchange.

C.unit of accounting.

D.standard of deferred payment.

11-What backs up the value of U.S.​ dollars?

A.Gold denominated Federal Reserve System assets.

B.Foreign currency reserves held by the Federal Reserve System.

C.Faith that the dollars represent command over goods and services.

D.Gold.

Answer 1

2) People tend to deposit the funds with banks rather than directly to the borrowers due to the reason that it is difficult for individuals to screen the borrowers and their ability to pay back the loans but due to banks performing this function at large scale it becomes cheaper for banks to perform this function .

From the given options asymmetric information moral hazard and adverse selection problem are all the same which are the reasons. This is due to incomplete information between two parties which makes loans uncertain.

But asset adverse selection is not the reason.

So answer is option C) asset aversion problem

3) when one party in financial transaction has more information then the other such type of problem is known as asymmetric information. This is because one party has asymmetric information about another in case of financial transaction taking place. So answer is option D) asymmetric information

6) Bank Run is caused when individuals or depositors feel that Bank would not be able to return their deposits and would turn insolvent this leads to many depositors withdrawing the money from the bank which causes the bank Run.

Answer is option B from the given options that is depositors feel that Bank does not have sufficient funds to cover their deposits.

9) Maria paying money to buy latte at Starbucks means that she is using money in exchange of latte so money is performing the function of medium of exchange in this case answer is option B medium of exchange.

11) US dollars is the only currency which is not backed by gold or any other foreign currency Reserves the citizens of us have saved in the dollar and in the government who backs their dollar. It is also backed by the faith that dollar represents command over goods and services.

So answer is option C

(You can comment for doubts)