| Adverse selection | The problem of distinguishing a good risk from a bad one before making a loan or providing insurance; it is caused by asymmetric information.
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| Asymmetric information | The fact that the two parties to a transaction have unequal knowledge about each other. A borrower, for example, has more information about his or her abilities and prospects than a lender.
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| Collateral | Assets pledged to pay for a loan in the event that the borrower doesn't make the required payments.
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| Deflation | A sustained fall in the general price level; the opposite of inflation.
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| Economies of scale | When the average cost of producing a good or service falls as the quantity produced increases.
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| Free rider | Someone who doesn't pay the cost but still gets the benefit of a good or service.
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| Moral hazard | The risk that a borrower or someone who is insured will behave in a way that is not in the interest of the lender or insurer; it is caused by asymmetric information.
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| Net worth | The difference between a firm's or household's assets and liabilities.
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| Unsecured loan | A loan that is not guaranteed by collateral.
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| Venture capital firm | A financial intermediary that specializes in investing in risky new "ventures" in return for a stake in the ownership and a share of the profits.
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