Requiring That Borrowers Put Up Collateral to Obtain a Loan

question 86

Multiple Choice

Requiring that borrowers put up collateral to obtain a loan is a tool designed to treat:

• A) the lemons problem.
• B) the problem of adverse selection.
• C) the problem of moral hazard.
• D) the free-rider problem.

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Definitions:

Writ of Execution

A court order that enables the enforcement of a judgment, usually involving the seizure of property to satisfy a debt.

Judgment Won

A judicial decision or decree that has been decided in favor of a party in a lawsuit.

Civil Law Litigation

Legal disputes involving private parties, organizations, or governments, resolved in a court setting under civil law.

Demand Payment

A request for the immediate payment of a debt or obligation.