Future Business Leader Achievments (FBLA) Economics Practice Exam

Which of the following is the return earned by the owners of financial capital who lend their assets to business?

1. Rent

2. Implicit wages

3. Profits

4. Interest

The correct answer is: Interest

The return earned by the owners of financial capital who lend their assets to businesses is known as interest. When individuals or institutions provide their capital to businesses—often in the form of loans—they are compensated for the use of that capital through interest payments. This interest represents a cost to the borrower (the business) but serves as a form of income to the lender (the owner of the financial capital). Interest is fundamentally the price paid for the use of borrowed money and is typically expressed as a percentage of the principal amount over a specific period of time. It reflects the time value of money, where funds available now are worth more than the same sum in the future due to potential earning capacity. In the context of the other provided options, rent refers to payments made for the use of real estate or property, implicit wages refer to non-monetary benefits workers might receive, and profits pertain to the earnings remaining for equity shareholders after all expenses and interests have been paid from business operations. Each of these returns is distinct from interest, underscoring why interest is the correct answer in this scenario.