If Borrowers with the Most Risky Investment Projects Are More

question 49

Multiple Choice

If borrowers with the most risky investment projects are more likely to seek bank loans than borrowers with the safest investment projects,banks face the problem of ________.

• A) adverse credit risk
• B) adverse selection
• C) moral hazard
• D) conflict of interest

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Definitions:

Learned

Acquired or developed through experience or education.

Behave Aggressively

Exhibiting actions or behaviors that intend to harm or intimidate others physically or psychologically.

Thirst Level

An individual's subjective feeling of needing to drink fluids, often influenced by physiological signals of dehydration.

Drive-Reduction Theory

A theory of motivation suggesting that the motivation arises from biological needs that demand satisfaction, driving individuals to reduce the state of tension through specific behaviors.