CA Foundation Exam > CA Foundation Questions > When the bank rate increases the demand for l...
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When the bank rate increases the demand for loans _______:
- a)Reduces
- b)Increases marginally
- c)Remains unchanged
- d)Increases drastically
Correct answer is option 'A'. Can you explain this answer?
Verified Answer
When the bank rate increases the demand for loans _______:a)Reducesb)I...
A: Reduces
When the bank rate increases, the demand for loans tends to reduce. The bank rate is the interest rate at which the central bank of a country lends money to commercial banks. When the bank rate is increased, it becomes more expensive for banks to borrow from the central bank, which in turn increases the cost of borrowing for customers. As a result, the demand for loans tends to decrease as customers are less willing to borrow at higher interest rates.
This is because higher interest rates increase the cost of borrowing for businesses and households, which can reduce their ability and willingness to take out loans. Higher interest rates may also reduce the demand for loans by reducing the demand for investment and consumption, as higher borrowing costs can make such activities less attractive.
However, the impact of a change in the bank rate on the demand for loans may not be the same in all cases and may depend on a variety of factors such as the overall economic conditions, the availability of alternative sources of financing, and the creditworthiness of the borrowers.
Most Upvoted Answer
When the bank rate increases the demand for loans _______:a)Reducesb)I...
A: Reduces
When the bank rate increases, the demand for loans tends to reduce. The bank rate is the interest rate at which the central bank of a country lends money to commercial banks. When the bank rate is increased, it becomes more expensive for banks to borrow from the central bank, which in turn increases the cost of borrowing for customers. As a result, the demand for loans tends to decrease as customers are less willing to borrow at higher interest rates.
This is because higher interest rates increase the cost of borrowing for businesses and households, which can reduce their ability and willingness to take out loans. Higher interest rates may also reduce the demand for loans by reducing the demand for investment and consumption, as higher borrowing costs can make such activities less attractive.
However, the impact of a change in the bank rate on the demand for loans may not be the same in all cases and may depend on a variety of factors such as the overall economic conditions, the availability of alternative sources of financing, and the creditworthiness of the borrowers.
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Question Description
When the bank rate increases the demand for loans _______:a)Reducesb)Increases marginallyc)Remains unchangedd)Increases drasticallyCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When the bank rate increases the demand for loans _______:a)Reducesb)Increases marginallyc)Remains unchangedd)Increases drasticallyCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the bank rate increases the demand for loans _______:a)Reducesb)Increases marginallyc)Remains unchangedd)Increases drasticallyCorrect answer is option 'A'. Can you explain this answer?.
When the bank rate increases the demand for loans _______:a)Reducesb)Increases marginallyc)Remains unchangedd)Increases drasticallyCorrect answer is option 'A'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about When the bank rate increases the demand for loans _______:a)Reducesb)Increases marginallyc)Remains unchangedd)Increases drasticallyCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for When the bank rate increases the demand for loans _______:a)Reducesb)Increases marginallyc)Remains unchangedd)Increases drasticallyCorrect answer is option 'A'. Can you explain this answer?.
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