Credit Most people regard a bank, savings and loan association, or similar financial institution as a place to deposit or borrow money. When you deposit money you receive interest. When you borrow money, you must pay interest. You may borrow money from a lending institution to buy a car, and the resource that will be transformed into money to repay the loan is your labor.
Businesses also transform resources into money.
A firm may have a valuable asset in the form of an idea for a product or service. The loan is repaid out of future sales revenue. Whether used to buy a car or launch a product, a loan is used to purchase something and will be repaid through the use of resources. In this chapter, we take a good look at money and the financial institutions that create and handle it. We begin by outlining the functions and characteristics of money that make it an acceptable means of payment for products, services, and resources.