Because of the Moral Hazard Problem

question 24

Multiple Choice

Because of the moral hazard problem,

• A) lenders will write debt contracts that restrict certain activities of borrowers.
• B) lenders will more readily lend to borrowers with high net worth.
• C) debt contracts are used less frequently to raise capital than equity contracts.
• D) all of the above.
• E) only A and B of the above.

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Definitions:

Nonvolatile

Describes a type of memory or storage that retains data even when power is turned off, opposite to volatile memory which loses its content when power is lost.

Electrical Noise

Unwanted disturbances superimposed on a useful electrical signal, often leading to errors in the information being transmitted.

Operating Errors

Operating errors are mistakes or faults that occur during the operation of a system or machine, often leading to incorrect results or malfunction.

Processor

The central part of a computer or other digital systems that performs the instructions of a computer program by carrying out the basic arithmetic, control, and input/output operations.