A Lender Who Wants to Avoid the Problem of Adverse

question 82

Multiple Choice

A lender who wants to avoid the problem of adverse selection could:

• A) charge a very high interest rate and assume all loan applicants are high risk.
• B) charge the same average interest rate to all borrowers.
• C) charge a low interest rate and make the applicant prove they warrant the low rate by providing information.
• D) only lend by issuing credit cards.

---

Definitions:

Kerala, India

A state located in the southwestern part of India, known for its significant achievements in human development, health, and education.

Malthusian Trap

A condition, proposed by Thomas Malthus, where excessive population growth leads to resource depletion, resulting in population checks through famine, disease, or war, preventing long-term societal advancement.

Population Growth

The increase in the number of individuals in a population, often measured by birth rate minus death rate, and influenced by factors like immigration and emigration.

Rural Community

A community located in non-urban areas, typically characterized by small populations, agriculture-based economies, and strong social ties.