What is a possible reason behind restricted supply of spot loans to borrowers during a credit crunch?
A)Expansionary monetary policy actions of the Federal Reserve.
B)FI's increased aversion toward lending.
C)Shift to the right in the loan supply function at all interest rates.
D)Low aggregate demand from borrowers to take down loan commitments.

Question

Quizplus · Accepted Answer

During a credit crunch, financial institutions (FI's) may become more risk-averse and reduce lending, particularly to borrowers who may be seen as higher risk. This can lead to a restricted supply of spot loans to these borrowers.

What Is a Possible Reason Behind Restricted Supply of Spot