A default is an example of a drastic action,economically speaking,because it __________.
A)bolsters lenders' confidence,but results in cutoff of future loans
B)obliterates lenders' confidence,but results in future loans
C)obliterates lenders' confidence and results in cutoff of future loans
D)bolsters lenders' confidence and results in future loans

Question

Quizplus · Accepted Answer

A default, meaning failure to repay a loan, would obliterate lenders' confidence in the borrower's ability to repay future loans. As a result, they would likely cut off future loans to that borrower. Therefore, option C is the correct answer. Neither A nor D accurately describes the consequences of a default on lenders' confidence and future loans. Option B is contradictory because it suggests that a default destroys lenders' confidence but still results in future loans, which is unlikely.

A Default Is an Example of a Drastic Action,economically Speaking,because