Final answer:
The correct answer is option c. Stock market fluctuations are the best example of financial risk among the options listed, as they involve potential monetary losses from investments due to market volatility. A rise in money supply typically results in a decline in interest rates, encouraging borrowing and economic activity. Conversely, situations like market collapses or high inflation can lead to higher interest rates.
Step-by-step explanation:
Understanding Financial Risk and Interest Rates
Among the choices provided, stock market fluctuations are the best example of an outcome related to financial risk. This is because financial risk often involves the possibility of losing money on financial instruments, such as stocks, due to changes in the financial market. For instance, if the stock market undergoes significant volatility, the value of investments can rapidly change, leading to potential losses or gains.
When it comes to interest rates, several factors can affect their movement. A decline in interest rates is primarily related to scenarios in the financial market. If there is a rise in the supply of money (option c), interest rates typically decline. This is because when more money is available for lending, banks and other financial institutions often lower interest rates to encourage borrowing and investing.
In contrast, factors such as a stock market collapse and rising inflation generally result in adverse economic conditions and may eventually lead to increased interest rates to control inflation and stabilize the economy. Similarly, an increase in the quantity of loans made and received is likely to occur with an increase in money supply or a decrease in interest rates, making it cheaper to borrow.