Describe how changes to the money supply affect the bank's ability to lend to customers.(1 point)

Question

Responses

A decrease in the money supply increases the ability for assets and securities to be turned to cash. The liquidity in the markets increases as a result and the bank's ability to lend increases.
A decrease in the money supply increases the ability for assets and securities to be turned to cash. The liquidity in the markets increases as a result and the bank's ability to lend increases.

A decrease in the money supply decreases the ability for assets and securities to be turned to cash. The liquidity in the markets decreases as a result and the bank has less ability to lend.
A decrease in the money supply decreases the ability for assets and securities to be turned to cash. The liquidity in the markets decreases as a result and the bank has less ability to lend.

An increase in the money supply increases the ability for securities to be sold to other banks for other assets. The liquidity in the markets increases as a result and banks have more ability to lend.
An increase in the money supply increases the ability for securities to be sold to other banks for other assets. The liquidity in the markets increases as a result and banks have more ability to lend.

An increase in the money supply decreases the ability for assets to be sold for securities. The liquidity in the markets decreases as a result and banks have less ability to lend.
An increase in the money supply decreases the ability for assets to be sold for securities. The liquidity in the markets decreases as a result and banks have less ability to lend.

Answer 1

Overall, changes to the money supply can impact a bank's ability to lend to customers. When there is a decrease in the money supply, it can increase liquidity in the markets and the bank's ability to lend. Conversely, an increase in the money supply can decrease liquidity in the markets and limit the bank's ability to lend. The money supply plays a significant role in determining the availability of funds for lending purposes.