When an economy is adjusting to a recent reduction in the money supply,what is a likely consequence?
A) Inflation remains high.
B) Growth stays positive.
C) Interest rates continue to rise.
D) Unemployment is high.

Question

Quizplus · Accepted Answer

Unemployment is high because a reduction in the money supply leads to a decrease in aggregate demand, which in turn leads to a decrease in output and employment.

When an Economy Is Adjusting to a Recent Reduction in the Money