Final answer:
True, during tight money periods, short-term financing can be difficult to obtain as financial institutions may limit their lending due to financial stress, negatively impacting various economic sectors that rely on borrowed funds.
Step-by-step explanation:
During tight money periods, it is indeed true that short-term financing may be hard to obtain. In such times, banks and financial institutions may experience financial stress due to a widespread decline in the value of their assets. This results in a decrease in the availability of loans, affecting various sectors of the economy that rely heavily on borrowed funds such as business investment, home construction, and car manufacturing. The 2008-2009 Great Recession is a prime example of how a banking crisis can lead to a significant reduction in lending and economic hardship.
Moreover, when consumers and businesses anticipate being able to repay their loans in the future, they are more willing to borrow money. This is seen among college students who borrow money to pay for their expenses with the expectation of repaying these loans once they are gainfully employed. Likewise, businesses look for financial investments to engage in projects that may not yield returns for many years. Hence, confidence in future repayment capabilities can lead to an increased demand for financial capital in the market.