Final answer:
A decrease in demand for loans would not result from an increase in business prospects. Instead, better prospects typically boost loan demand. An increase in loanable funds lowers the interest rate and can increase loan quantity.
Step-by-step explanation:
The question asks about the factors in the financial market that would lead to a change in the quantity of loans made and received. Ceteris paribus, a decrease in the demand for loans would not necessarily result from an increase in business prospects and a decrease in the level of savings. Instead, improved business prospects often increase the demand for loans as businesses seek funding for expansion. Conversely, a decrease in savings could reduce the supply of loanable funds, leading to higher interest rates and potentially lower demand for loans. However, it is also important to understand that an increase in the amount of available loanable funds, where more people are willing to lend, tends to bid down the interest rate, making borrowing more attractive and potentially increasing the quantity of loans.
Looking at the options provided, an increase in either the demand for loans or the supply of loanable funds would lead to an increase in the quantity of loans. (a) A rise in demand for loans or (c) a rise in supply of loanable funds would cause this increase because higher demand prompts more borrowing, and a higher supply lowers interest rates, making loans more affordable and attractive to potential borrowers.