QuestionJune 7, 2025

b. Suppose the supply of loanable funds is stable, but the demand fluctuates from year to year. Which of the following may cause the demand for loanable funds to increase? Choose all answers that apply. A positive outlook on a firm's expectations about the future. An increase in the money supply. A decrease in the interest rate.

b. Suppose the supply of loanable funds is stable, but the demand fluctuates from year to year. Which of the following may cause the demand for loanable funds to increase? Choose all answers that apply. A positive outlook on a firm's expectations about the future. An increase in the money supply. A decrease in the interest rate.
b. Suppose the supply of loanable funds is stable, but the demand fluctuates from year to year.
Which of the following may cause the demand for loanable funds to increase? Choose all answers that apply.
A positive outlook on a firm's expectations about the future.
An increase in the money supply.
A decrease in the interest rate.

Solution
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Answer

A positive outlook on a firm's expectations about the future. ### A decrease in the interest rate. Explanation 1. Analyze Positive Outlook A positive outlook on a firm's expectations about the future can lead to increased investment, raising the demand for loanable funds. 2. Analyze Increase in Money Supply An increase in the money supply typically lowers interest rates, which can indirectly increase the demand for loanable funds as borrowing becomes cheaper. 3. Analyze Decrease in Interest Rate A decrease in the interest rate directly makes borrowing more attractive, increasing the demand for loanable funds.

Explanation

1. Analyze Positive Outlook<br /> A positive outlook on a firm's expectations about the future can lead to increased investment, raising the demand for loanable funds.<br /><br />2. Analyze Increase in Money Supply<br /> An increase in the money supply typically lowers interest rates, which can indirectly increase the demand for loanable funds as borrowing becomes cheaper.<br /><br />3. Analyze Decrease in Interest Rate<br /> A decrease in the interest rate directly makes borrowing more attractive, increasing the demand for loanable funds.
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