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Questions and Answers
Which one of the following is the correct definition of credit?
Which one of the following is the correct definition of credit?
- Credit is the ability to acquire goods and services without the need for repayment.
- Credit is the financial capability to acquire goods, services, or money with a promise to repay the borrowed amount. (correct)
- Credit is the process of investing in businesses to facilitate economic activities.
- Credit is the exchange of goods and services without the need for repayment.
What is the importance of credit in modern economies?
What is the importance of credit in modern economies?
- Credit has no role in modern economies.
- Credit only facilitates personal consumption.
- Credit enables investments and provides financial flexibility. (correct)
- Credit is not relevant for international trade.
What are the types of credit mentioned in the text?
What are the types of credit mentioned in the text?
- Credit cards and mortgages
- Credit cards and loans (correct)
- Barter and credit cards
- Loans and mortgages
What did early human societies rely on before the emergence of formal credit systems?
What did early human societies rely on before the emergence of formal credit systems?
What is one of the limitations of barter mentioned in the text?
What is one of the limitations of barter mentioned in the text?
Flashcards
Definition of Credit
Definition of Credit
Credit is the financial capability to acquire goods, services, or money with a promise to repay the borrowed amount.
Importance of Credit
Importance of Credit
Credit enables investments and provides financial flexibility for individuals and businesses.
Types of Credit
Types of Credit
Credit cards allow you to borrow funds for purchases, while loans provide a lump sum for specific purposes.
Barter System
Barter System
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Limitations of Barter
Limitations of Barter
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Study Notes
Definition of Credit
- Credit is the trust that allows one party to provide resources to another party with the expectation that the second party will reciprocate in the future.
Importance of Credit
- Credit plays a crucial role in facilitating economic growth and development in modern economies by enabling the exchange of goods and services.
- It allows for the creation of new opportunities, fosters innovation, and supports economic activities.
Types of Credit
- There are two primary types of credit: formal credit and informal credit.
- Formal credit refers to credit provided by formal institutions such as banks, while informal credit refers to credit provided by individuals or groups outside of formal institutions.
Early Credit Systems
- Early human societies relied on reciprocity and gifts before the emergence of formal credit systems.
Limitations of Barter
- One major limitation of barter is the "coincidence of wants," where two parties must have what the other wants at the same time, limiting the scope of exchange.
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