The Possibility That a Borrower Might Engage in Riskier Behavior

question 2

Multiple Choice

The possibility that a borrower might engage in riskier behavior after a loan is made is called

• A) adverse selection.
• B) liability aversion.
• C) moral hazard.
• D) the risk of default.

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Definitions:

Three Theories

A reference to a group of three distinct principles or ideologies within a particular field of study or inquiry, often used to explain or predict phenomena.

Sociocultural Context

Refers to the combination of social, cultural, and environmental factors that influence an individual's behavior and perceptions.

Emotionality

The capacity to experience and express emotions, varying greatly among individuals and significantly influencing behavior and social interactions.

Standardized Tests

Tests that are administered and scored in a consistent manner, used to assess the performance of individuals relative to a standard or to each other.