A depository institution is a firm that takes deposits from_________ and makes loans to___________ .
A) firms; households
B) firms; other firms
C) households and firms; other households and firms
D) households; firms

Question

Quizplus · Accepted Answer

Depository institutions take deposits from both households and firms and make loans to both households and firms. This is because both households and firms need access to credit for various reasons, including home purchases, business investments, and personal loans. Choice A and D are too narrow in their focus and do not capture the full scope of depository institutions' operations. Choice B is incorrect as depository institutions typically do not make loans to other firms.

A Depository Institution Is a Firm That Takes Deposits From_________