When a country's central bank decreases the money supply, which statement best predicts the consequences?

Question

Quizplus · Accepted Answer

When a country's central bank decreases the money supply, there will be less money available in circulation. This will cause a decrease in demand for goods and services, leading to a fall in prices. Additionally, with less money available, the value of the currency will increase relative to other currencies in the world, leading to an appreciation of the currency. Thus, the correct statement is that its price level falls, and its currency appreciates relative to other currencies in the world.

When a Country's Central Bank Decreases the Money Supply, Which