When the Fed increases the money supply, interest rates:
A) rise.
B) fall.
C) are unaffected.
D) rise and then fall.

Question

Quizplus · Accepted Answer

When the Fed increases the money supply, it increases the amount of available credit in the economy, which leads to a decrease in interest rates. This is because there is more money available for borrowing, so lenders have to compete with each other to offer lower interest rates in order to attract borrowers.

When the Fed Increases the Money Supply, Interest Rates