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Understanding Credit

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Questions and Answers

What is the fundamental element of credit according to the text?

Trust (correct)

Ability to obtain goods or services

Creditor and debtor relationship

Immediate payment

How is credit distinguished from debt based on the text?

Credit involves immediate payment, while debt does not.

Credit creates obligations, while debt involves trust.

Credit is about obtaining goods without payment upfront, debt refers to any remaining portion of an amount. (correct)

Credit does not require trust, while debt does.

Who is a debtor according to the text?

An entity that owes money to another party (correct)

An entity that lends money to another party

A person who gives credit to multiple parties

A person who trusts others with money

Which of the following entities could be a creditor?

Bank Signup and view all the answers

What is a basic element of credit according to the text?

The ability to obtain a thing or value Signup and view all the answers

Which of the following is NOT classified as a user of credit in the text?

Creditors Signup and view all the answers

What does 'Capital' refer to in the 5 C's of Credit?

Person's real and personal property that can be used for credit approval Signup and view all the answers

Which type of credit is used to finance the production and marketing of agricultural products?

Agricultural Credit Signup and view all the answers

What is the economic function of credit mentioned in the text?

To make capital available Signup and view all the answers

What does 'Collateral' refer to in the context of credit according to the text?

Person's real and personal property for credit approval Signup and view all the answers

Study Notes

Credit Fundamentals

The fundamental element of credit is trust, which is the confidence that the borrower will repay the loan.
Credit is distinguished from debt in that credit involves the ability to borrow, whereas debt is the actual amount borrowed.
A debtor is an individual or entity that borrows money or owes a debt.

Credit Entities

A creditor is an individual or entity that lends money or extends credit.

Credit Elements

A basic element of credit is the ability to repay the loan.

Credit Users

The following are NOT classified as users of credit: individuals who save money.

5 C's of Credit

'Capital' refers to the borrower's wealth or assets.

Agricultural Credit

Agricultural credit is used to finance the production and marketing of agricultural products.

Economic Function of Credit

The economic function of credit is to facilitate the exchange of goods and services by enabling the transfer of purchasing power from one party to another.

Collateral

'Collateral' refers to assets or properties that are pledged as security for a loan.

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Description

Explore the concept of credit, including the ability to obtain goods/services now and pay for them later, as well as the meaning of credit originating from the Latin word 'credo' meaning to believe or trust. Learn about the obligations and rights created for both debtors and creditors in transactions involving the transfer of goods, services, funds, property, and more.