Final answer:
Increased shareholder demands for dividend payouts and expanded investment opportunities in the debt market may contribute to declining cash reserves and increased debt dependency in American corporations. In financial markets, an increase in supply tends to lower interest rates, while an increase in demand will increase the quantity of loans made.Option B,C are the correct answers.
Step-by-step explanation:
The factors that might contribute to the trend of declining cash reserves and increased dependency on debt markets for American corporations include Increased shareholder demands for dividend payouts (B) and potentially Expanded investment opportunities in the debt market (C). Higher required dividend payouts can reduce the cash reserves. However, Option A is incorrect as it pertains to equity markets, not debt; and Option D, concerning the foreign exchange market, does not directly relate to declining cash reserves or debt dependency.
As for the effects of diminishing confidence in the U.S. economy as a place to invest, this could affect the supply of financial capital, potentially leading to higher interest rates as businesses compete with the government for financial resources. Regarding interest rates, a rise in the supply of financial capital (C) will generally lead to a decline in interest rates, while a rise in demand for loans (A) will lead to an increase in the quantity of loans made and received.
When foreign investors are worried about repayment, they might begin to pull money out of various markets (18), including stock and bond markets, real estate, and banks, which can have significant impacts on both liquidity and interest rates in the affected countries.