Final answer:
An excess quantity of money demanded causes an increase in interest rates. Additionally, an increased supply of loanable funds in the financial market results in both a higher quantity of loans and a decrease in interest rates. Therefore correct option is A
Step-by-step explanation:
An excess quantity of money demanded will typically lead to a rise in interest rates. This happens because when there is more demand for money than supply, lenders can charge higher rates. Consequently, higher interest rates reduce the demand for borrowing money, which helps to bring the money market back into equilibrium.
Regarding the financial market and its effects on loans and interest rates:
- A rise in the supply of money or loanable funds will typically lead to an increase in the quantity of loans made and received, as more funds are available for borrowers.
- A rise in the supply in the financial market will also typically lead to a decline in interest rates as the increased availability of funds makes borrowing cheaper.