People who apply for loans know more about their ability to repay the loan than the lenders do. This is an example of
A) asymmetric information.
B) public information.
C) a negative externality.
D) a community rating.

Question

Quizplus · Accepted Answer

Asymmetric information refers to a situation in which one party in a transaction has more information than the other party. In this case, borrowers have more information about their ability to repay the loan than lenders do, which can lead to adverse selection and moral hazard problems.

People Who Apply for Loans Know More About Their Ability