Because of the Adverse Selection Problem

question 37

Multiple Choice

Because of the adverse selection problem,

• A) good credit risks are more likely to seek loans, causing lenders to make a disproportionate amount of loans to good credit risks.
• B) lenders may refuse loans to individuals with high net worth, because of their greater proclivity to "skip town."
• C) lenders are reluctant to make loans that are not secured by collateral.
• D) all of the above.

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Definitions:

Discretionary Standards

Guidelines or criteria that grant a certain degree of flexibility or judgment to the person or entity applying them, rather than prescribing a strict course of action.

Codified Law

Laws that have been systematically collected, arranged, and published in a code, making legal rules more accessible and understandable.

Declaratory Judgment

A court judgment that determines the rights of parties without ordering any specific action or awarding damages.

Trademark

A distinctive word, name, symbol, device, or combination thereof, which enables consumers to identify favored products or services and which may find protection under state or federal law.