An example of the moral hazard problem in international investment would be that

Question

Quizplus · Accepted Answer

The moral hazard problem in international investment refers to the risk that the recipient of the investment may use the funds for riskier projects than the approved project, which increases the likelihood of default and loss for the investors. This occurs because the investors do not have complete information about the recipient's intentions and may not be able to monitor the use of the funds effectively. Therefore, the riskiest projects may be funded, which increases the overall risk of the investment portfolio. Choices A, C, and D are not related to the moral hazard problem in international investment.

An Example of the Moral Hazard Problem in International Investment