Individuals who have a tendency to default are usually more willing to pay high interest rates and thus get loans.This describes an example of _____

Question

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This scenario describes adverse selection, where the lender is selecting borrowers who are more likely to default because of their willingness to pay higher interest rates. This is due to asymmetric information, where the lender has less information about the borrower's likelihood of default than the borrower themselves.

Individuals Who Have a Tendency to Default Are Usually More