Explain why low-income households have limited liability in credit markets. Name two important consequences that result from limited liability and asymmetric information in the credit market.

Discussion Question

Typewrite your answers and show all your work when making calculations. You can make calculations by hand and add the images to the document but make sure to typewrite your answers . Remember to submit to Canvas before 2:30 pm on the due date.

Credit

Explain why low-income households have limited liability in credit markets.

Name two important consequences that result from limited liability and asymmetric information in the credit market.

Using the two terms you listed in part b above, categorize the following as being examples of either one, the other, or neither:

Choosing a high value, but risky agricultural project.

Only individuals wanting to invest on projects that offer high reward, but low probability of success are the ones seeking loans.