Poor-credit risks seeking loans present an example of _____

Question

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Poor-credit risks seeking loans present an example of adverse selection, which is a phenomenon where high-risk individuals are more likely to apply for or accept insurance than low-risk individuals. In the case of loans, individuals with poor credit are more likely to seek out loans, which makes it harder for lenders to distinguish between high-risk and low-risk borrowers, leading to higher interest rates and a greater likelihood of default.

Poor-Credit Risks Seeking Loans Present an Example of _____