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

Name: When the Fed decreases the money supply, interest rates A) rise. B) fall. C) are unaffected. D) rise and then fall. E) fall and then rise.
Brand: Quizplus
Rating: 4.8 (44 reviews)

Question

Quizplus · Accepted Answer

When the Fed decreases the money supply, it reduces the amount of money available for borrowing and lending. This creates a higher demand for money, and as a result, interest rates rise.

When the Fed Decreases the Money Supply, Interest Rates