Firms become more pessimistic about the future: Supply decreases
The housing market collapses: Supply decreases
People become less patient: Supply increases
A large number of workers enter their midlife: Supply increases
Interest rates fall: Supply increases
Certainly, let's analyze each scenario and categorize them based on how they may affect the supply of loanable funds:
1. **Firms become more pessimistic about the future:**
- Categorization: **Supply decreases**
- Explanation: If firms are pessimistic about the future, they may reduce investment plans, leading to a decreased supply of loanable funds.
2. **The housing market collapses:**
- Categorization: **Supply decreases**
- Explanation: A collapse in the housing market often indicates financial instability and decreased wealth, which can reduce the overall supply of loanable funds.
3. **People become less patient:**
- Categorization: **Supply increases**
- Explanation: If individuals become less patient, they may be less inclined to save and more inclined to borrow, increasing the supply of loanable funds.
4. A large number of workers enter their midlife:
- Categorization: Supply increases**
- Explanation: As workers enter midlife, they may focus on saving for future needs, contributing to an increased supply of loanable funds.
5. Interest rates fall:
- Categorization: **Supply increases**
- Explanation: When interest rates fall, it becomes less attractive to save, and individuals may choose to spend or invest, leading to an increased supply of loanable funds.
Factors such as pessimism among firms, a collapse in the housing market, and falling interest rates are likely to decrease the supply of loanable funds.
On the other hand, if people become less patient or a large number of workers enter midlife, the supply of loanable funds is expected to increase.