if the domino effect occurs as a result of changes in the money supply, what will most likely happen as an…
if the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend?\nborrowing will decrease.\ninterest rates will decrease.\ninvesting will decrease.\ninflation will decrease.
Answer
Brief Explanations:
When banks have more money to lend, the supply of loanable funds increases. In the market for loanable funds, an increase in supply (ceteris paribus) leads to a decrease in the price of borrowing, which is the interest rate. Borrowing is likely to increase (not decrease) as loans are cheaper. Investing may increase as lower interest rates make some investment projects more profitable. Inflation is not an immediate result; it is a more long - term effect related to overall money supply growth and spending patterns.
Answer:
Interest rates will decrease.