Question

What happens in an economy when current availability is restricted and credit is made costlier ? ​

Answer 1

Answer:

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Explanation:

When credit availability is restricted or the credit multiplier gets lowered and the market rate of interest of availing credit by the commercial bank is increased, then deficient demand or deflation occurs in an economy as the money supply gets reduced and the aggregate demand falls.

Answer 2

What happens in an economy when the current availability is restricted and credit is made costlier? ​

If for some reason the availability of credit is restricted or the credit multiplier is reduced, the market rate of interest for availing credit by commercial banks is increased.

That is, when the availability of credit is restricted, commercial banks increase their rates of interest to take maximum advantage of the credit, due to which there is a spike in the economy and the inflow of money decreases. This has a negative effect that aggregate demand falls. and the economy declines

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