When the Federal Reserve loosens money,the __________ and interest rates __________.

Question

Quizplus · Accepted Answer

When the Federal Reserve loosens money, it increases the money supply, which would shift the money supply curve to the right. With an increase in the money supply, the interest rates tend to fall as there is more money available to be borrowed. Therefore, the correct option is B where the money supply curve shifts right and interest rates fall.

When the Federal Reserve Loosens Money,the __________ and Interest Rates