A decrease in the willingness or ability of banks to lend has a significant impact on the economy because
A)it causes the short-run aggregate supply curve to shift to the left.
B)it causes the short-run aggregate supply curve to shift to the right.
C)some borrowers from banks are unable to borrow from nonmoney markets.
D)bank profits decline and employment in the banking sector contracts.

Question

Quizplus · Accepted Answer

When banks are less willing or able to lend, some borrowers who rely on banks for financing may not be able to secure funding from alternative sources, such as nonmoney markets. This can limit their ability to invest, expand, or even continue operations, affecting the broader economy.

A Decrease in the Willingness or Ability of Banks to Lend