Janie convinces her Uncle Seymour that she is on the Dean's list each semester and asks him to lend her $5000 to help pay for her university tuition for the upcoming year,assuring him that she will be able to pay him back as soon as she graduates and gets a job.In reality,Janie has flunked out of university,has spent all her savings on food for her 40 ferrets,and wants to use the money to bail her boyfriend out of jail.Not being honest with her uncle when asking for the loan is an example of ________,and spending the borrowed money to pay her boyfriend's bail is an example of ________.

Question

Quizplus · Accepted Answer

Janie's dishonesty with her uncle when asking for the loan is an example of adverse selection, as she misrepresents her academic status and ability to pay back the loan. Spending the borrowed money on something other than the intended purpose is an example of moral hazard, as Janie takes advantage of the trust her uncle placed in her and uses the money for her own purposes instead of paying her tuition.

Janie Convinces Her Uncle Seymour That She Is on the Dean's