When the Borrower Engages in Activities That Make It Less

question 68

Multiple Choice

When the borrower engages in activities that make it less likely that the loan will be repaid,________ is said to exist.

• A) asymmetric information
• B) adverse selection
• C) moral hazard
• D) fraud

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Definitions:

Proactive Interference

The difficulty in learning new information because of the interference of existing knowledge.

Misinformation Effect

A phenomenon in which people's recollections of events can be distorted by exposure to incorrect or misleading information afterward.

Loftus and Palmer

Researchers who conducted seminal studies on the misinformation effect, demonstrating how post-event information can alter a person's memory of an event.

Vividly Descriptive Word

A term or phrase used to convey a strong, clear, and detailed image of a person, scene, or event.