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:

Economic Organization

The structured system of production, distribution, and consumption of goods and services within a society or economy.

Base Year

A reference year against which economic growth, inflation, and other economic indicators are measured to assess changes over time.

A W Phillips

An economist known for the Phillips Curve, which suggests an inverse relationship between unemployment and inflation rates.

Unemployment Rate

The quota of the working-age population that is without a job and searching for one.