Question about moral hazard and adverse selection
If banks face a problem in loan markets when bad credit risks are the ones most likely to seek bank loans, it is described as:
a) moral hazard
b) moral suasion
c) adverse selection
d) fraud
e) Profit making trouble
Which of the above options is correct? Is it moral hazard?
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The solution contains a multiple choice question about moral hazard and adverse selection.
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