A Borrower Who Takes Out a Loan Usually Has Better

question 21

Multiple Choice

A borrower who takes out a loan usually has better information about the potential returns and risks of the investment projects he plans to undertake than the lender does.This inequality of information is called

• A) moral hazard.
• B) asymmetric information.
• C) noncollateralized risk.
• D) adverse selection.

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Definitions:

Lesbians

Women who are emotionally, romantically, and/or physically attracted to other women.

AIDS

Acquired Immunodeficiency Syndrome, a life-threatening condition caused by the human immunodeficiency virus (HIV), which severely damages the immune system.

Illusory Correlation

A cognitive anitr that describes when people falsely believe that two variables, such as events or actions, are related despite a lack of evidence.

Confirmation Bias

The tendency to search for, interpret, or remember information in a way that confirms one's preconceptions.