Question

Increase In			Affect on Supply			Affect on Demand			What does the Interst Rate do?
Wealth and Income
Risk
Near Term Spending
Monetary Expansion
Economic Role
Utility Derived from Assets
Restrictive Covenent
Tax Increase
Currency Appreciation
Expected Inflation

Answer 1

Increase In	Affect on Supply	Affect on Demand	What does the Interest Rate do?
Wealth and Income	Increase	Increase	Low
Risk	Decrease	Decrease	High
Near Term Spending	Decrease	Decrease	High
Monetary Expansion	Increase	Increase	Low
Economic Role	Increase	Increase	High
Utility Derived from Assets	Decrease	Increase	High
Restrictive Covenant	Increase	Decrease	Low
Tax Increase	Decrease	Increase	High
Currency Appreciation	Increase	NA	High
Expected Inflation	Decrease	Increase	High

1. If wealth and income increase, funds suppliers will be willing to supply more funds and as the income has increased, individuals will demand more.
2. If the risk increases, people will not be ready to borrow, demand decreases and suppliers will also decrease their supply. High risks are always associated with high rate of interest which gives high returns.
3. Near Term Spending refers to a short time in the future. If the individuals have some spending in the near future, they will demand less and suppliers will not be willing to invest.
4. Increase in Monetary Expansion means there is increase in the money circulation. If money supply increase suppliers will have more money to invest. Increase in the money supply will also lead to an increase in consumer spending which increases the demand.
5. If there is growth in the economy, standard of living of people will increase, wealth and income will increase, and so the demand and supply will increase.(same as Point 1)
6. If Utility derived from assets increase, people will be willing to borrow more but suppliers will not be willing to invest.
7. A restrictive covenant is a financial contract (loan) with restrictions. Borrowers will not be ready to borrow as restriction is more. So the demand will decrease and supply will increase.
8. Tax burden is mostly on the sellers, so if tax increase, supply will decrease and demand will increase.
9. Currency appreciation refers to the increase in the value of one currency against foreign currency. Increase in the value of the home country's currency will attract foreign investment as the interest rates are high.
10. An increase in expected inflation means that suppliers will lose purchasing power and borrowers will gain more than originally anticipated. (i.e) Supply decreases and demand increases.