Final answer:
If a foreign real estate company plans to build resort condominiums in Canada, this would increase the demand for loanable funds in the Canadian market as the company seeks loans to finance the construction, potentially leading to higher interest rates.
Step-by-step explanation:
When a foreign real estate company decides to build new resort condominiums in Canada, this represents a substantial investment in the Canadian economy. This investment will increase the demand for loanable funds in Canada's financial market because the company will likely seek funding through loans to finance the construction of these condominiums.
Consequently, since more entities are looking to borrow funds for their investment projects, the increased competition for financial resources generally causes interest rates to go up, assuming the supply of funds does not change significantly. In this scenario, the correct answer is: b. the demand for loanable funds increases.
An increase in demand can lead to more loans being given out, provided there is sufficient supply of loanable funds. However, if the supply of loanable funds does not meet the new demand, this can result in higher interest rates, which could potentially crowd out smaller borrowers in the market.