Question

Describe how banks and financial institutions decrease the likelihood of financial crises

Describe how financial intermediaries reduce moral hazard
Describe when to use the real interest rate and when to use the nominal interest rate
Explain how economists reconcile the idea of efficient markets/the efficient market hypothesis and market crashes and bubbles

Answer 1

Collateral, property pledged for the repayment of a loan, is a good way to reduce moral hazard. Borrowers don't take kindly to losing, say, their homes. Also, the more equity they have—in their home or business or investment portfolio—the harder they will fight to keep from losing it.

Step-by-step explanation: