If a Business Firm Takes Out a Loan from a Bank

question 26

Multiple Choice

If a business firm takes out a loan from a bank, but does not use the funds as the bank intended, the problem is

• A)moral hazard.
• B)adverse selection.
• C)intermediation.
• D)securitization.

---

Definitions:

Social Categorization

The assignment of a person one has just met to a category based on characteristics the new person has in common with other people with whom one has had experience in the past.

Cognitive Dissonance

A psychological conflict resulting from incongruous beliefs and attitudes held simultaneously.

Operant Conditioning

A learning process in which the frequency of an organism's behavior is modified by reinforcement or punishment.

Positive Reinforcement

A process in operant conditioning where a behavior is followed by a rewarding stimulus, increasing the likelihood of that behavior occurring again.