Which of the following refers to an agreement in which the lender supplies the borrower with money, goods or services in return for the promise of future payment?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Loan
Credit, or a loan, is an agreement in which the lender gives the borrower money, goods or services now, and the borrower promises to pay back in the future, usually with interest.
Why the other options are incorrect
Option (1) Deposit — Incorrect. Money that people keep with a bank, which they can withdraw later.
Option (3) Cash reserves — Incorrect. The part of deposits a bank keeps as cash to meet withdrawals.
Option (4) Liquidity reserves — Incorrect. Cash and assets a bank holds that can be turned into cash quickly.