Other things being equal,a decrease in the money supply will lead to ________ in real interest rates and,in the short run,________ in real GDP because ________.

Question

Quizplus · Accepted Answer

A decrease in the money supply typically leads to an increase in real interest rates because there is less money available for lending, making borrowing more expensive. This increase in real interest rates can lead to a decrease in real GDP in the short run because higher borrowing costs can reduce investment spending, which is a component of GDP.

Other Things Being Equal,a Decrease in the Money Supply Will