Which of the following would normally be expected to result in an increase in the supply of funds,all else equal?
I. The perceived riskiness of all investments decreases.
II. Expected inflation increases.
III. Current income and wealth levels increase.
IV. Near term spending needs of households increase as energy costs rise.
A)II and III only
B)I and IV only
C)I,II,III,and IV
D)I and III only
E)II,III,and IV only

Question

Quizplus · Accepted Answer

I. The perceived riskiness of all investments decreases - this would not necessarily result in an increase in the supply of funds, as investors may simply choose to hold onto their funds rather than invest them in riskier assets.

II. Expected inflation increases - this would lead to an increase in the supply of funds, as investors may choose to save more in anticipation of higher prices in the future.

III. Current income and wealth levels increase - this would also lead to an increase in the supply of funds, as households may have more disposable income to save or invest.

IV. Near term spending needs of households increase as energy costs rise - this would not result in an increase in the supply of funds, as households may have to cut back on savings or investments in order to cover their increased expenses.

Which of the Following Would Normally Be Expected to Result