The current economy is strong and many people are feeling confident about their future and ability to pay off debt. Because of this they are taking on more bank loans for things like new cars, renovating their homes, or buying new homes. Using the four step process with this type of market, what will banks most likely do with their loans?

• They would increase the quantity supplied of loans and increase the interest rate.
• They would increase the supply of loans and decrease the interest rate.
• They would decrease the quantity supplied of loans and decrease the interest rate.