The likelihood that individuals who seek to borrow money may use the funds for unworthy, high-risk projects is

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Adverse selection refers to the situation where the party in a transaction has information that the other party does not, leading to a selection of risks that are more likely to produce negative outcomes. In this context, it describes how individuals who are more likely to engage in high-risk or unworthy projects are the ones most eager to borrow money, because they might not bear the full consequences of their project's failure.

The Likelihood That Individuals Who Seek to Borrow Money May