Final answer:
An increase in the cost of raw goods, ceteris paribus, will cause a decrease in supply. In financial markets, a rise in supply of loanable funds leads to increased loans and lower interest rates.
Step-by-step explanation:
Ceteris paribus, which is a Latin phrase meaning 'all other things being equal', is often used in economics to isolate the effect of one variable from the rest. When there is an increase in the cost of raw goods, the immediate effect is that it becomes more expensive for producers to make their products. Assuming all other factors remain constant, producers will be less willing or able to supply the same quantity at the prevailing price level. Therefore, the correct answer to the question is D) Decrease in supply.
Turning to the subject of financial markets, when there is a rise in supply of loanable funds, this typically leads to an increase in the quantity of loans made and received, since more funds are available for borrowing. Conversely, a fall in supply of loanable funds would typically lead to a decrease in the quantity of loans. Furthermore, a rise in supply of loanable funds is also associated with a decline in interest rates, because when more funds are available, lenders must offer better terms to attract borrowers.