AI Associate AI Fundamentals Practice Question
A financial services firm uses an AI model to approve small business loans. The model denies loans at a much higher rate for businesses owned by minorities, even when financial indicators are similar. What is the MOST likely cause?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Bias in training data
Bias in training data can cause the model to learn historical discrimination patterns. Overfitting would not cause systematic demographic differences. Hallucination is for generative AI. Low recall may indicate the model misses some positive cases but doesn't explain the demographic disparity.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Low recall for minority groups
Why it's wrong here
Low recall would mean missing some minority applicants who should be approved, but the issue is higher denial rates across the board.
- ✓
Bias in training data
Why this is correct
If historical loan decisions were biased against minority-owned businesses, the model would learn and perpetuate that bias.
- ✗
Hallucination in model predictions
Why it's wrong here
Hallucination refers to generative AI producing false information, not relevant to loan approval models.
- ✗
Overfitting to historical data
Why it's wrong here
Overfitting might reduce generalization but doesn't inherently cause demographic bias unless the training data already contains bias.
Go deeper
Related to this question
About these practice questions
One of 753 original AI Associate practice questions on Courseiva, each with a full explanation and wrong-answer analysis — not exam dumps or protected exam content. Learn why practice questions differ from exam dumps →
JA
Written by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
This AI Associate practice question is part of Courseiva's free Salesforce certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the AI Associate exam.