Final answer:
When a company purchases supplies on account, liabilities increase because the company incurs an account payable. A rise in the supply of loans in the financial market leads to an increase in the quantity of loans made and received as well as a decline in interest rates.
Step-by-step explanation:
When a company purchases supplies on account, the correct answer is d. Liabilities increase. This is because the company is receiving supplies without immediately paying cash, thus creating an account payable, which is a liability. The company agrees to pay the supplier at a later date, which means that while assets (in the form of supplies) increase, so do liabilities (accounts payable).
In terms of the changes in the financial market that would lead to an increase in the quantity of loans made and received, the correct answer is c. a rise in supply of loanable funds. An increase in the supply of loanable funds, typically from savers or financial institutions, would lower the interest rate and make borrowing more attractive, leading to an increase in the quantity of loans.
Concerning the changes in the financial market that will lead to a decline in interest rates, the correct answer is again c. a rise in supply of loanable funds. When there is an excess supply of money, lenders will decrease the interest rate to encourage borrowing, resulting in a decline in interest rates.