Credit Rationing Occurs When a Bank

question 53

Multiple Choice

Credit rationing occurs when a bank

• A) refuses to make a loan of any amount to a borrower, even when she is willing to pay a higher interest rate.
• B) restricts the amount of a loan to less than the borrower would like.
• C) does either A or B of the above.
• D) does neither A nor B of the above.

---

Definitions:

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power over time.

Budget Deficit

The financial situation where a government's expenditures exceed its revenues within a specified period.

Flow Variable

A quantity measured over a specified period of time, indicating the rate of change in a variable.

Stock Variable

A quantity measured at a specific point in time, representing a snapshot of a certain value, such as the amount of money in a savings account.