-The effect on the current market for loans of borrowers' expectations that the Fed will raise the reserve requirement in the near future is shown by the movement from:
A) D1 to D2 in Figure A.
B) D1 to D2 in Figure B.
C) S1 to S2 in Figure C.
D) S1 to S2 in Figure D.

Question

-The effect on the current market for loans of borrowers' expectations that the Fed will raise the reserve requirement in the near future is shown by the movement from:
A) D1 to D2 in Figure A. 
B) D1 to D2 in Figure B. 
C) S1 to S2 in Figure C. 
D) S1 to S2 in Figure D.

Quizplus · Accepted Answer

If borrowers expect the Fed to raise the reserve requirement, they may anticipate higher interest rates or tighter credit conditions in the future. This expectation can increase the current demand for loans, shifting the demand curve from D1 to D2.

-The Effect on the Current Market for Loans of Borrowers