What is seen as a possible reason behind restricted supply of spot loans to borrowers during a credit crunch?
A) Expansionary monetary policy actions of the Reserve Bank of Australia.
B) FI's increased aversion toward lending during tight monetary conditions.
C) Low aggregate demand from borrowers to take down loan commitments.
D) Decrease in cost of funds.

Question

Quizplus · Accepted Answer

During a credit crunch, financial institutions tend to become more risk-averse and cautious about lending due to the heightened uncertainty and potential for default. This can result in restricted supply of spot loans to borrowers, even if there is demand for credit. Expansionary monetary policy actions, low aggregate demand, and decrease in cost of funds may have different impacts on credit supply depending on the specific context and conditions.

What Is Seen as a Possible Reason Behind Restricted Supply