The statement "Only the people who don't need money can borrow it!" can be explained by the concept of
A)adverse selection.
B)moral hazard.
C)direct finance.
D)costly state verification.

Question

Quizplus · Accepted Answer

Adverse selection refers to the situation in which borrowers who are more likely to default are the ones who seek out a loan. This can result in lenders only offering high-interest rates or not offering loans at all to those who need it most. The statement "Only the people who don't need money can borrow it!" is referencing this concept, suggesting that those who have the means to pay back a loan are the ones who are most likely to be approved for one.

The Statement "Only the People Who Don't Need Money Can