A moral hazard problem occurs before a loan is made,and the adverse selection problem occurs after a loan is made.

Question

Quizplus · Accepted Answer

The opposite is true - a moral hazard problem occurs after a loan is made, when the borrower has less incentive to behave prudently, while an adverse selection problem occurs before a loan is made, when lenders have limited information about the borrower's creditworthiness.

A Moral Hazard Problem Occurs Before a Loan Is Made,and