Final answer:
An increase in expected inflation leads to more bond supply and less demand due to inflationary pressure, which answers the original question. In financial markets, interest rates typically fall with a rise in bond supply, and the quantity of loans increases with a rise in demand.
Step-by-step explanation:
An increase in expected inflation tends to lead to an increase in the supply of bonds because issuers rush to secure debt before the interest rates go up. Conversely, there is a decrease in demand for bonds as investors anticipate lower returns due to inflation eroding the value of future cash flows from bonds. This scenario is best described by option (a) Increase in supply, decrease in demand - Inflationary pressure.
Regarding changes in the financial market, a rise in supply of bonds (c) typically leads to a decline in interest rates as more securities are available, driving down the price and increasing the yield. Conversely, a rise in demand for loans (a) would tend to result in an increase in the quantity of loans made and received as financial institutions have more capital to lend due to the higher demand.