Final answer:
An institutional breakdown in U.S. financial markets would likely decrease aggregate demand, not affect the long-run aggregate supply. An increase in the supply of money generally causes a decline in interest rates and can lead to an increase in the quantity of loans if the increase in supply matches or exceeds the rise in demand.
Step-by-step explanation:
An institutional breakdown in U.S. financial markets is likely to decrease aggregate demand rather than affect the long-run aggregate supply. In the context of financial markets, changes in supply and demand can affect interest rates and the quantity of loans made and received. For instance, an increase in the supply of money typically leads to a decline in interest rates because there is more capital available for borrowing, and lenders must compete for borrowers by offering lower rates.
Conversely, when there's an increase in demand for loans without a corresponding increase in supply, interest rates may rise due to the higher competition for the available funds. If both supply and demand for loans rise, more loans are likely to be made and received if the supply increase is sufficient to meet or surpass the increase in demand.