?For a mortgage lender that makes mortgage loans to borrowers, which one of the following would be an example of adverse selection?
a. After the loan has been made, individuals become careless with their finances
b. Individuals most likely to default are the ones most likely to apply for the loan
c. Borrowers investing their loan proceeds differently than the bank requires
d. None of the above
Answer: b. Individuals most likely to default are the ones most likely to apply for the loan
Economics
You might also like to view...
All of the following are characteristics of allocation by rationing EXCEPT
a. lack of fairness. b. high administrative cost. c. efficiency. d. diminished incentive for workers.
Economics
A good may be inferior at some income levels and normal at others
Indicate whether the statement is true or false
Economics