Because of the Adverse Selection Problem

question 104

Multiple Choice

Because of the adverse selection problem,

• A) lenders may make a disproportionate amount of loans to bad credit risks.
• B) lenders may refuse loans to individuals with low net worth.
• C) lenders are reluctant to make loans that are not secured by collateral.
• D) all of the above.

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Definitions:

Frustration

A psychological state resulting from obstacles that impede someone's ability to achieve their goals.

Reaching A Goal

The successful achievement of a specific outcome or objective.

Vacillation

The inability to decide between different opinions or actions; indecision.

Sold Out

A situation where all available units of a certain product have been sold.