Which of the following best explains the primary incentive banks have for lending money to homebuyers?

• A. Banks want to help homebuyers avoid paying taxes.
• B. Banks earn interest income from the loans they provide.
• C. Banks aim to reduce government regulation in the housing sector.
• D. Banks seek to increase the supply of houses in the market.

Answer: (B)

Verified step by step guidance

1. Understand the role of banks in the economy, particularly in the housing market, where they provide loans to homebuyers.
2. Recognize that banks are profit-oriented institutions, so their primary incentive is to generate income from their activities.
3. Identify that when banks lend money to homebuyers, they charge interest on the loan amount, which is a source of income for the bank.
4. Evaluate the other options: helping homebuyers avoid taxes, reducing government regulation, or increasing housing supply are not direct financial incentives for banks.
5. Conclude that the best explanation for banks lending money to homebuyers is that they earn interest income from the loans they provide.