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Multiple Choice Quiz
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1
Financial institutions exist to reduce transactions costs and information costs.
A)True
B)False
2
The problem called adverse selection arises before a transaction occurs, while the problem called moral hazard arises after a transaction occurs.
A)True
B)False
3
Liquid financial assets can be converted into money quickly, easily, and at a low cost.
A)True
B)False
4
Financial intermediaries diversify risk but only for large investments.
A)True
B)False
5
The vast majority of investment financing comes from external sources.
A)True
B)False





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