Collateral requirements lessen the consequences of ________ because the collateral reduces the lender's losses in the case of a loan default and it reduces ________ because the borrower has more to lose from a default

A) adverse selection; moral hazard
B) moral hazard; adverse selection
C) adverse selection; diversification
D) diversification; moral hazard


A

Economics

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Illustrate a counter-example to this proposition.

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Economics