If the demand for loans from banks falls what happens to money supply and market rates?

simple layman logic.... demad for money decrease %26gt; lesser supply of money in market %26gt; value of money increases %26gt; deflatation %26gt; fall in market rates to attract consumer to take loan and balance the demand supply equation

If the demand for loans from banks falls what happens to money supply and market rates?credit report

It generally works the other way round. Governments tighten money suppy and lift rates, causing reduced demand for loans. And vice versa when the government is tryoing to stimulate the economy.

If the demand for loans from banks falls what happens to money supply and market rates? loan

If the demand for loans falls, it probably means people are percivieng a high intrest, so getting a loan for whatever reason is too expensive. So if financing is too expensive, saving must be cheap, and people rather save their money. If demand for loans goes down, so does the demand for money, so we have a higher money supply. The stimulation so that individuals ask for loans again is to lower the market rates, which are going to fall to find an equilibrium between money supply and demand. As market rates go down, people start asking for loans, since it is %26quot;cheaper%26quot; than before.|||Consider the typical economics graph. Put interest rate on the y axis, and dollars on the x axis. Then draw a downward sloping money demand curve %26quot;\%26quot;, and a vertical money supply curve %26quot;|%26quot;.

If the demand for money (e.g. loans) falls, then the downward sloping demand curve shifts downward, but the vertical money supply curve doesn%26#039;t shift. Thus we have a lower equilibrium interest rate resulting from the decrease in demand for bank loans.