Credit Rationing by an FI

question 86

Multiple Choice

Credit rationing by an FI

• A)involves restricting the quantity of loans made available to individual borrowers.
• B)results from a positive linear relationship between interest rates and expected loan returns.
• C)is not used by FIs at the retail level.
• D)involves rationing consumer loans using price or interest rate differences.
• E)is only relevant to banks.

---

Definitions:

Variable Expenses

Costs that change in proportion to the level of activity or volume of output in a business.

Fixed Expenses

Costs that do not change in total regardless of the level of production or sales activity, such as rent and salaries.

Net Income

The total profit or loss of a company after all expenses, including taxes and operating costs, have been subtracted from revenues.

Break-Even Point

The point at which total cost and total revenue are equal, meaning there is no profit or loss.