Let Us Suppose That You Apply for a Loan with a Bank

question 59

Multiple Choice

Let us suppose that you apply for a loan with a bank. You tell the bank that you are going to remodel your kitchen, but after you get the loan you go to Las Vegas to gamble with the money. Your behavior is an example of

• A)adverse selection.
• B)direct credit allocation.
• C)moral hazard.
• D)indirect credit allocation.

---

Definitions:

Accrued Liabilities

Expenses that have been incurred but not yet paid, reflected on a company's balance sheet.