Collateral Requirements Lessen the Consequences of ________ Because the Collateral

question 103

Multiple Choice

Collateral requirements lessen the consequences of ________ because the collateral reduces the lender's losses in the case of a loan default and it reduces ________ because the borrower has more to lose from a default.

• A)adverse selection;moral hazard
• B)moral hazard;adverse selection
• C)adverse selection;diversification
• D)diversification;moral hazard

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Definitions:

Constricting Pupils

The process where the pupils of the eyes become smaller, often in response to bright light or focusing on close objects.

Psychological Safety

A cultural feature where individuals feel safe to express ideas, ask questions, and admit mistakes without fear of punishment or embarrassment.

Implicit Trust

A form of trust that develops naturally or is assumed to exist without the need for verbal confirmation or explicit evidence.

Social Network Trust

involves the level of trust established within networks of individuals, particularly in digital or social networking contexts.