Author Question: What is adverse selection? A) It refers to the situation in which one party to a transaction ... (Read 26 times)

@Brianna17 · **on:** Jun 29, 2018

What is adverse selection?

A) It refers to the situation in which one party to a transaction takes advantage of knowing more than the other party to the transaction.
B) It refers to the actions people take after they have entered into a transaction that make the other party to the transaction worse off.
C) It refers to the private, self-interested actions people that people pursue, which when taken collectively leads to a loss in economic surplus.
D) It refers to the actions people take before they enter into a transaction so as to mislead the other party to the transaction.

Question 2

How is the equilibrium exchange rate determined?

What will be an ideal response?

trog · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

A

Answer to Question 2

The equilibrium exchange rate is the exchange rate that sets the quantity of U.S. dollars demanded equal to the quantity of U.S. dollars supplied. At the equilibrium exchange rate there is neither a shortage nor a surplus of U.S. dollars.