Explore BrainMass
Share

Explore BrainMass

    Policies & Prospects

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    For each of the following situations explain which of the policy issues is associated with stance the institution has taken.

    A)The IMF extends a long-term loan to a nations government to help it maintain publicly supported production of goods and services that the government otherwise would have turned over to private companies.

    Moral hazard
    Adverse selection
    Making loans that would be otherwise funded in the private market
    High level of corruption makes loans have little chance of success

    B) the world bank makes a loan to companies in an impoverished nation in which government officials typically demand bribes equal to 50% of companies' profits before allowing them to engage in any new investment project.

    Moral hazard
    Adverse selection
    Making loans that would be otherwise funded in the private market
    High level of corruption makes loans have little chance of success

    C)The IMF offers to make a loan to banks in a country in which the government's rulers commonly require banks to extend credit to finance high risk investment projects headed by the rulers' friends & relatives.

    Moral hazard
    Adverse selection
    Making loans that would be otherwise funded in the private market
    High level of corruption makes loans have little chance of success

    © BrainMass Inc. brainmass.com October 9, 2019, 8:56 pm ad1c9bdddf
    https://brainmass.com/economics/banking/policies-prospects-associated-situations-167230

    Solution Preview

    A. These loans would otherwise have been funded in a private market.

    B. This situation involves adverse selection. When bribes are required, only ...

    Solution Summary

    The IMF extends for a long-term loan to a nations government to help it maintain publicly supported productions of goods and services that the government otherwise would have turned over to private companies are determined.

    $2.19