A line of credit is a credit facility that is extended by a financial institution e.g a bank to an individual, firm or government, that enables the economic agent to draw on the credit facility when the individual or firm needs funds.
A line of credit takes different forms, such as demand loan, discounting, overdraft limit, export packing credit, special purpose, term loan, purchase of commercial bills etc. The line of credit is a source of funds that can be used at the discretion of the borrower. Lines of credit can either be unsecured or secured by collateral.
The correct word for the blank space is: line of credit.
Explanation:
Line of credit refers to the maximum amount an individual or organization has available in a credit card or loan. It is determined by the credit history of the borrower implying the higher the income of the individual or organization, the higher the line of credit.
Withdrawing money from a line of credit implies paying an interest rate for a determined amount of time in addition to the principal of the loan. The term is usually determined by the borrower at the moment of purchasing.
Explanation: The rationing function of price describes the way in which the use of price is done for rationing of several scarce resource. This is done automatically by the market forces of demand and supply as when the demand for a commodity exceeds its supply the price of the commodity rises leading to decrease in demand.
Thus, rationing function states to ration the goods and distribute them carefully and not to distribute the surplus amount.
the checkable deposits are part of M1 as well as the currency and coins. Therefore, a component of M1 decrease (currency) while another of M1 (checkable deposits) increase.
As the banking system works with a 100-percent required reserve there is no multiplier effect from the deposit therefore M1 do not change.
