Creditors Are Interested in Assessing a Borrower's Capacity and Character

question 25

Multiple Choice

Creditors are interested in assessing a borrower's capacity and character, as well as overall economic conditions when reviewing a loan application.Which of the following would make a bank more willing to lend funds?

• A)A small business faces deteriorating business conditions because of a recession in the overall economy.
• B)The owner of a small business has been personally bankrupt twice.
• C)A retail store has been diligent in making all of its payments on time and in full over the past five years.
• D)A large corporation missed an interest payment on one of its bond issues last month.

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Definitions:

Fed

Short for the Federal Reserve System, it's the central banking system of the United States responsible for monetary policy.

Discretionary Fiscal

Fiscal policies involving government spending and taxation that are at the discretion of the government and are used to influence the economy.

Economic Stabilization

Actions by governments or central banks to maintain economic growth, control inflation, and reduce unemployment.

Keynesian Economics

An economic theory that advocates for active government intervention in the marketplace and monetary policy to stabilize economic fluctuations and boost demand.