When applying for a loan, a borrower tends to know more about her ability to pay it back than does the bank.This is an example of

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Asymmetric information refers to a situation where one party in a transaction has more or better information than the other party. In this case, the borrower has more information about her ability to pay back the loan than the bank does, which puts the bank at a disadvantage and increases the risk of the borrower defaulting on the loan.

When Applying for a Loan, a Borrower Tends to Know