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In financial markets, a decrease in investment causes ____________?

When investment decreases, fewer borrowers compete for funds in the financial market. This lowers the demand for loanable funds, resulting in a higher availability of funds for lenders. Consequently, borrowing becomes easier and more funds are available at existing interest... Read More

1 FINANCE MCQS

In financial markets, a decrease in investment causes ____________?

  • Increase in interest rate
  • Decrease in interest rate
  • Increase in availability of funds
  • Decrease in availability of funds
Correct Answer: C. Increase in availability of funds

Detailed Explanation

When investment decreases, fewer borrowers compete for funds in the financial market. This lowers the demand for loanable funds, resulting in a higher availability of funds for lenders. Consequently, borrowing becomes easier and more funds are available at existing interest rates.

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