Question 2

A debit on a person's checking account decreases the account's balance.

When a debit transaction occurs, it signifies that money is being withdrawn from the account, resulting in a decrease in the overall balance.

A) The account's balance increases.

This option is incorrect because a debit does not add funds to the account. Instead, it represents an outflow of money, which directly reduces the balance.

B) The account's balance decreases.

This option is correct as a debit transaction removes funds from the checking account, leading to a lower balance. This directly reflects the nature of debits in banking, where money is taken out.

C) The account's interest rate increases.

This option is incorrect since debits do not affect the interest rate of the account. Interest rates are determined by the financial institution's policies and the type of account, not by individual transactions.

D) The account's interest rate decreases.

This option is also incorrect for the same reason as Option C. A debit transaction does not influence the interest rate applicable to the account; it solely affects the balance.

Conclusion

The correct answer is B, as a debit directly causes the account's balance to decrease. Options A, C, and D are incorrect because they misinterpret the impact of debit transactions on checking accounts, which are characterized by a reduction in available funds. Understanding how debits function is crucial for effective account management.