Question

Terrence owns a successful coffee bar. He'd like to expand the business by adding a second location across town, but has found that economic uncertainty has made most banks reluctant to provide him with the loan he would need to do so. With which type of resource is Terrence struggling?

Answer 1

Terrence is struggling to obtain a loan from banks due to economic uncertainty and banks' concerns about borrowers' ability to repay and the need for excess reserves.

Terrence is struggling with obtaining a loan from banks. In times of economic uncertainty, banks may be reluctant to provide loans due to the fear that borrowers may lose the ability to repay their loans and that they may need to meet their obligations with excess reserves. This can deal a blow to sectors of the economy that rely on borrowed money like business investment. Terrence is facing this issue as he wants to expand his coffee bar by adding a second location but is finding it challenging to secure a loan from banks.