Final answer:
The REO inventory will A) increase as the number of foreclosures rises. A rise in demand or supply in the financial market will lead to an increase in the quantity of loans.
Step-by-step explanation:
As the number of foreclosures rises, the REO (Real Estate Owned) inventory will A) increase.
This is because foreclosures result in banks or lenders taking possession of properties, which then become part of their REO inventory until they are sold to a new owner.
Impact on Loan Quantity
An increase in the quantity of loans made and received in the financial market can be influenced by two main factors: demand and supply.
Specifically, a rise in demand for loans indicates more borrowers are seeking loans, and a rise in supply indicates more lenders are willing to provide loans.
Both of these scenarios are conducive to an increased quantity of loans being made and received.
Interest Rates and Financial Market
A decline in interest rates is typically observed when there is a rise in supply of loanable funds in the market.
This increased supply, often caused by lenders lowering rates to attract more borrowers, leads to lower overall interest rates.