When banks refuse to lend to borrowers at very high rates of interest, they are trying to alleviate the moral hazard problem.

Question

Quizplus · Accepted Answer

Moral hazard refers to the situation where one party is more likely to take risks because another party bears the consequences of those risks. Refusing to lend at very high rates is more about avoiding usury or reducing the risk of default, rather than addressing moral hazard.

When Banks Refuse to Lend to Borrowers at Very High