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Homework answers / question archive / Everything else remaining unchanged, what is likely to happen to the credit demand curve of an economy if: (a) businesses in the economy see scope for growth and are planning to expand production in the future? (b) households are pessimistic about future incomes? (c) the government is planning to borrow money from financial institutions for investment in infrastructures?
Everything else remaining unchanged, what is likely to happen to the credit demand curve of an economy if:
(a) businesses in the economy see scope for growth and are planning to expand production in the future?
(b) households are pessimistic about future incomes?
(c) the government is planning to borrow money from financial institutions for investment in infrastructures?
(a) This will shift the credit demand curve to the right. It is because businesses will now search for more credit to expand their production.
(b) This will shift the credit demand curve to the left. It is because households will reduce credit demand because they are not sure about their future income and are expecting a downfall. Therefore, they will take less credit as they are expecting to have less money for repayment in the future.
(c) This will shift the credit demand curve to the right. It is because government demand for credit will rise.
