Question 10 of 10 Which situation best illustrates the process of capital formation?
A. An engineer tries to limit her spending during the week.
OB. An artist buys bonds that will increase in value over time
OC. Afactory worker takes out a high-interest loan to buy a new home.
D. A farmer increases his profits by growing a variety of new crops.

OC. A factory worker takes out a high-interest loan to buy a new home.

Explanation:

This situation is most suitable for the employer but also the banking sector. If a worker takes such a loan, he will be forced to continue working to repay that loan. The bank will profit primarily because of the interest it has taken. It will also benefit the employer for several years to have workers who will nonetheless be loyal to the company, given that legal sanctions for non-refund of interest follow.

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