The frequent farm loan waivers in India may give rise to the problem of
Expected future waivers can reduce borrowers’ incentive to repay after borrowing: moral hazard. Debt overhang is an excessive existing debt burden, adverse selection hidden…
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The frequent farm loan waivers in India may give rise to the problem of
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Correct answer D
Expected future waivers can reduce borrowers’ incentive to repay after borrowing: moral hazard. Debt overhang is an excessive existing debt burden, adverse selection hidden borrower types before contracting, and risk aversion a preference over uncertain payoffs.
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UGC NET Economics