Asked by
Deborah Cassidy-Cobb
on Nov 11, 2024
Verified
Suppose you borrow $1,000 to purchase a car.Which of the following correctly represents the changes in your personal balance sheet after the bank lends the money,but before you spend it?
A) Assets: loan,+$1,000;Liabilities and net worth: checking deposit,+$1,000
B) Assets: loan,-$1,000,checking deposit,+$1,000;Liabilities and net worth: no change
C) Assets: loan,+$1,000,checking deposit,-$1,000;Liabilities and net worth: no change
D) Assets: checking deposit,+$1,000;Liabilities and net worth: loan,+$1,000
E) Assets: checking deposit,+$1,000;Liabilities and net worth: loan,-$1,000
Personal Balance Sheet
A financial statement that summarizes an individual's financial position at a certain point in time, showing assets, liabilities, and net worth.
Checking Deposit
A bank account that allows for the deposit and withdrawal of money for daily transactions, typically offering easy access through checks, ATMs, and electronic transfers.
- Detail the linkage between loans and deposits in the framework of the banking system.
Verified Answer
SM
Learning Objectives
- Detail the linkage between loans and deposits in the framework of the banking system.