When a Bank Makes a Loan

question 124

Multiple Choice

When a bank makes a loan:

• A) It reduces the amount of money in the monetary system.
• B) It creates a transactions-account balance for the borrower.
• C) It usually gives the borrower cash.
• D) It prints additional money for the borrower.

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Definitions:

Debt Securities

represent money that is borrowed and must be repaid, with terms that define the amount borrowed, interest rate, and maturity date, commonly issued in the form of bonds, notes, or bills.

Bonds

Debt securities issued by corporations or governments to raise funds, whereby the issuer owes the holders a debt and is obliged to pay interest.

De Jure Corporation

A corporation that is fully in compliance with all state laws and therefore officially recognized as a legal entity.

De Facto Corporation

A company that operates as if it were legally incorporated, despite not having completed the necessary incorporation processes, and may thus be treated as a corporation in many contexts.