Question: Question 1 (a) Explain the problems of adverse selection and moral hazard caused by asymmetric information. How can financial intermediaries alleviate those problems? [18 marks]

hazard caused by asymmetric information. How can financial intermediaries alleviate those problems?

Question 1 (a) Explain the problems of adverse selection and moral hazard caused by asymmetric information. How can financial intermediaries alleviate those problems? [18 marks] (b) Explain the Diamond model of delegated monitoring. [15 marks] [Total 33 marks]

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