Moral Hazard Problems Arise When

question 81

Multiple Choice

Moral hazard problems arise when

• A)lenders have difficulty in distinguishing between good and lemon firms.
• B)when a downturn in economic activity makes repaying loans difficult for borrowers.
• C)borrowers have an incentive to act in ways that do not reflect the lender's interests.
• D)borrowers default on loans.

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Definitions:

Order/Symmetry

The desire or compulsion to arrange objects in a precise, orderly, or symmetrical manner, often observed in individuals with obsessive-compulsive disorder.

OCD

Obsessive-Compulsive Disorder (OCD) is characterized by the presence of persistent thoughts (obsessions) and repetitive behaviors (compulsions) that an individual feels compelled to perform.

Exposure

The state of being exposed to something (such as an infectious agent, a toxin, or stress) which may have effects on health or behavior.

Ritual Prevention

Intentionally refraining from maladaptive coping patterns. By doing so, the patient gradually and with repeated exposures experiences anxiety climb, peak, and then subsidence.