Assume that the Federal Reserve decreases the money supply. This action will cause ________ to decrease.

Question

Quizplus · Accepted Answer

When the Federal Reserve decreases the money supply, it typically leads to higher interest rates as there is less money available for borrowing. Higher interest rates make borrowing more expensive, which can reduce investment in the economy because businesses and individuals are less likely to take out loans for new projects or purchases.

Assume That the Federal Reserve Decreases the Money Supply