Question 24 1 pts Asking a borrower to post a large collateral reduces which of the following problems for the lender? O Adverse selection only C) Moral Hazard onlyr O Transactions costs only C) freerider problem only 0 Adverse selection and moral hazard O Adverse selection and transactions costs 0 Adverse selection and freerider O Moral Hazard and transactions costs 0 Moral Hazard and freeerider O Transactions costs and freerider Question 25 1 pts There is a sudden 30 percent reduction in stock prices. This is called the stock market crash. Is this event consistent with the efcient markets hypothesis? 0 Yes it is. It implies that people had not used all the available relevant information in predicting stock prices. 0 Yes it is. It implies that a lot of people could make substantial amount of money by short selling the stocks. This event would be inconsistent with the hypothesis if there was a substantial change in market fundamentals. O This event would be inconsistent with the hypothesis if there was not a substantial change in market fundamentals. Extra-credit question: For sometime, the US. banking lobby had been pressing the Fed to change one of its rules. They were doing this partly in reference to the "____ Clause" of the US. Constitution. Fill the blank with just one word. Question 32 1 pts Extra-credit question: Partly due to the pressure exerted by the banking lobby (as we saw in the previous question) and partly for another reason, the Fed changed that rule. What is the new rule now? 0 Paying interest on reserves 0 Reducing the required reserve ratio to zero. 0 Including savings deposits in M1. 0 Increasing the amount of deposits insured by FDIC from $150,000 to $250,000. 0 Reducing the discount rate to zero. 0 Reducing the federal funds rate to zero. 0 Stop regulating the amount of bank capital