Final answer:
When interest rates rise, businesses typically need to reduce production to match sales (Option B).
Rising interest rates often lead to businesses reducing production and scaling back expansion due to higher borrowing costs, which also discourages consumer spending on non-essential items.
Step-by-step explanation:
When interest rates rise, it becomes more expensive for businesses to borrow money. Consequently, they are less likely to expand due to higher costs of financing.
Thus, businesses may need to reduce production to match sales, which often slow down as consumer spending power diminishes.
High-interest rates usually discourage consumer spending on luxury and non-essential products, as the cost of credit increases for these items as well.
Conversely, a decline in interest rates can be attributed to a rise in the supply of money in the financial market. This increased supply means that more money is available for borrowing, which tends to lower the cost of borrowing.
Similarly, an increase in the quantity of loans made and received can result from either a rise in demand for loans or a rise in supply of loanable funds. In this context, a rise in supply, resulting in more funds available for lending, is a direct causation for the increase in quantity of loans made and received.