When the Fed decreases the money stock,the money supply curve shifts to the ________ and the interest rate ________,everything else held constant.

Question

Quizplus · Accepted Answer

According to the quantity theory of money, a decrease in the money stock shifts the money supply curve to the left, resulting in a decrease in the quantity of money supplied at each interest rate. This, in turn, increases the demand for money, leading to an increase in the interest rate. Therefore, the correct choice is D.

When the Fed Decreases the Money Stock,the Money Supply Curve