Answered: what is the impact on the Loanable…

Business

Finance

what is the impact on the Loanable Funds Market

Business/Professional Ethics Directors/Executives/Acct

8th Edition

ISBN:9781337485913

Author:BROOKS

Publisher:BROOKS

Chapter2: Ethics & Governance Scandals

Section: Chapter Questions

Problem 6.2EC

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Concept explainers

Regulation of Commercial Banks

The main function of any commercial bank is accepting deposits and lending money to borrowers. Apart from these two activities, commercial banks provide a host of other services to their customers, like discounting bills of exchange, acting as a custodian of a customer's will, and so on. In the absence of a proper regulatory framework or proper regulations in place, the commercial banks would have ended up charging exorbitant or varied rates of interest or service charges on the funds loaned by them or the services performed by them.

Question

If the Fed buys loans from banks, what is the impact on the Loanable Funds Market?

A) Decreases the supply of loanable funds and lowers the interest rate.

B) Increases the supply of loanable funds and lowers the interest rate.

C) Decreases the supply of loanable funds and raises the interest rate.

D) Increases the supply of loanable funds and raises the interest rate.

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