Question

Direct financing occurs when:

A) a lender-savers borrows directly from a borrower-spenders.
B) a borrower-spenders borrows directly from a lender-savers.
C) a lender-savers borrows from the federal government.
D) a borrower-spenders borrows from the federal government.

Answer 1

Direct financing occurs when a borrower-spenders borrows directly from a lender-savers.

Step-by-step explanation:

Direct financing occurs when a borrower-spenders borrows directly from a lender-savers. This is option B in the given choices. In this scenario, the borrower-spenders directly borrow money from the lender-savers without any intermediaries involved. For example, when an individual borrows money from a bank, it is considered as direct financing.