By Requiring Borrowers to Sign a Covenant When Getting a Loan

question 5

Multiple Choice

By requiring borrowers to sign a covenant when getting a loan, a bank is trying to minimize:

• A)high unexpected inflation.
• B)moral hazard.
• C)adverse selection.
• D)irrational exuberance.

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Definitions:

Sugar Act

A British law enacted in 1764 aiming to raise revenue from the American colonies by imposing a tax on sugar and other imports, contributing to colonial dissatisfaction and the American Revolution.

Legislation

Laws or legal enactments made or enacted by a governing body or legislature.

1764

A year marked by significant events including the British Parliament's passage of the Sugar Act, which was a revenue-raising effort that contributed to the American Revolutionary War.