What is the role of credit in the economy?

Credit plays a crucial role in the economy by allowing individuals and businesses to borrow money for consumption and investment. For consumers, credit enables purchases that may otherwise be unaffordable, such as buying homes or vehicles. For businesses, credit provides the necessary capital for expansion, research, and innovation. Credit also stimulates economic activity by promoting spending and investment, which drives demand for goods and services. However, excessive credit can lead to debt accumulation, financial instability, and economic bubbles, which is why it is important to maintain balanced credit practices.