Identify the following situation currently faced by the World Bank as adverse selection or moral hazard.
The World Bank has extended loans to the government of a developing country to finance construction. of a canal with a certain future flow of earnings. Now, however, the government has decided to redirect those funds to build a casino that may or may not generate sufficient profits to allow the government to repay the loan.

Solution and Explanation:

Moral Hazard – It is a situation when a  firm or an individual modify their behaviour once the person gets what one was desired to achieve; example, insurance, funding, etc.

Adverse selection - The firm does not information on the consumer, and, sells the product at lower price assessing a lower risk when more information would have made the seller ask for a higher price

a) Moral Hazard

The country changes its project plan after the World Bank extends the loan; if the World Bank has put in conditions that it be used only for a canal, then the loan cannot be used

don't use it that much

answer: b) the us is the leading importer but not the leading exporter.

extra info:

the u.s is the largest importer but it is not the largest exporter as china sits on the top of the table when it comes to leading exporters.

but u.s is not far from first,

they rank in 2nd globally as the worlds largest exporter.

happy to

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