The Risk That a Borrower Has a Greater Understanding About

question 60

Multiple Choice

The risk that a borrower has a greater understanding about their potential future behavior than a potential lender is known as ________.

• A)the problem of adverse selection
• B)the problem of moral hazard
• C)ornamental torsion
• D)the asymmetric innovation problem

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Definitions:

Purchasing Agent

A professional responsible for acquiring goods or services for their employer through negotiating price and terms.

Delivery Driver

An individual responsible for transporting goods from one place to another.

Mechanic

A professional skilled in the repair and maintenance of machinery, vehicles, or other technical equipment.

Janitor

A person employed to clean and maintain a building, such as an office, a school, or a residential complex.