One Effect of a Usury Law Is That It Will

question 42

Multiple Choice

One effect of a usury law is that it will

• A) benefit lenders.
• B) penalize borrowers.
• C) increase the efficiency of investment.
• D) subsidize borrowers with high incomes.

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Definitions:

Moral Hazard

A situation in which one party is more likely to take risks because the negative consequences of the risk will be borne by another party.

Buying Insurance

The process of obtaining a policy from an insurance company to protect against financial losses from specified risks, in exchange for a premium.

Adverse Selection

A situation in financial markets where buyers and sellers have different information, leading to transactions that favor the party with more information.

Good Drivers

Good drivers refer to individuals who operate vehicles safely, adhering to traffic laws and regulations, and minimizing the risk of accidents.