A contraction of the money supply

Name: A contraction of the money supply
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When the money supply is contracted, it becomes more difficult for consumers and businesses to obtain credit, which in turn increases the interest rate. This higher interest rate makes borrowing money more expensive, so consumers and businesses are less likely to spend and invest, causing a decrease in aggregate demand. Therefore, option A is the correct choice.

A Contraction of the Money Supply