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Chapter 4: Q. 8 (page 104)

Which of the following changes in the financial market will lead to an increase in the quantity of loans made and received:

a. a rise in demand

b. a fall in demand

c. a rise in supply

d. a fall in supply

Short Answer

Expert verified

Options a (a rise in demand ) and (c) is the correct response. Growth in financial market demand indicates that borrowers require more funds to meet their needs. A and C will enhance the number of loans available.

Step by step solution

01

Definition

Financial Markets:

The markets in a country that oversee the trading of derivatives and bonds at various times are referred to as financial markets. These markets are critical because they connect investors and businesses, providing the financial backing that businesses require to operate effectively in the market. In general, financial markets serve as a conduit between lenders and borrowers in the economy.

02

Step 2:

The correct answer is (a) (an increase in demand) and (c). Borrowers require more funds to meet their needs, as evidenced by rising financial market demand. A and C will increase the number of available loans. A and C will enhance the number of loans available. More people who want to borrow will result in more loans being handed out, and more people who want to lend will result in more loans being given out.

03

Conclusion

Therefore, increase borrowing, means demand will move to the right, indicating that we want to see an increase in overall demand.

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Most popular questions from this chapter

If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?

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