Question

Suppose an increase in demand in the market for mutual funds (a financial capital market) causes the interest rate to increase from 2% to 4%. How will this increase in demand affect supply and quantity supplied

Answer 1

With the increase in the demand of the mutual funds, the quantity supplied of the mutual funds will also increase because of the increase in the rate of interest.

Explanation:

All in all, when the rate of interest is rising, it normally makes shared assets, and different ventures, less appealing. This is on the grounds that the expense of acquiring increments with an expansion in loan fee and people and organizations has less cash to place in their portfolio.

As a result of this increase in the cost of borrowing, the quantity supplied of the mutual funds increases in the market, thus increasing the supply in the financial market.