Question

1 mishkin and eakins argue that many of the structural aspects of the financial system can be explained in the terms of transactions cost and asymmetric information problems. Define asymmetric information and the problems that it creates for financial markets. explain how the structure of the sierra leone financial system can be explained by the problem of asymmetric information

Answer 1

Asymmetric information means both the parties in transaction are not aware with the same or equal information ,,, some may be aware with the adequate information while other is not much adequate or one may be aware of complete information while may be not ware the complete information.

Problems it creates is.

Adverse selection .. it selecting the transaction even while it is not advantage

Imbalance that is not same opportunity for all

Moral hazard