Because of the problems of adverse selection and moral hazard, it has been suggested that the World Bank and International Monetary Fund

Question

Quizplus · Accepted Answer

Imposing tougher preconditions on borrowers can help reduce adverse selection and moral hazard. This can include requirements for government reform, economic policy changes, and increased transparency and oversight. By ensuring that borrowers are committed to improving their economic and political systems, the World Bank and International Monetary Fund can mitigate some of the risks associated with lending to developing countries. The other options are either ineffective or do not address the underlying problems of adverse selection and moral hazard.

Because of the Problems of Adverse Selection and Moral Hazard