Final answer:
A movement along the bond demand or supply curve is caused by a change in the expected return. A decline in interest rates is often due to a rise in bond supply, while an increase in loan quantities can occur with a rise in both demand and supply.
Step-by-step explanation:
A movement along the bond demand or supply curve occurs when the variable expected return changes. This is different from a shift in the curve, which occurs due to changes in other factors such as income, wealth, or the general level of interest rates.
Regarding the financial market, a decline in interest rates is typically observed when there is a rise in the supply of bonds (or financial capital), as it increases the availability of funds for borrowers, thus reducing the cost of borrowing. Conversely, an increase in the quantity of loans made and received in the financial market will most likely be the result of a rise in demand or a rise in supply, as either condition promotes more lending and borrowing activity.
It is crucial to understand these relationships as they underscore how the bond market responds to various economic triggers and reflect broader implications for the economy.
A movement along the bond demand or supply curve occurs when bond price changes. When the bond price changes, it directly affects the return on investment for bondholders. If the bond price decreases, the expected return increases, which causes a movement along the bond demand or supply curve.