If the Fed increases the money supply,the interest rate

Name: If the Fed increases the money supply,the interest rate
Brand: Quizplus
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Question

Quizplus · Accepted Answer

When the Fed increases the money supply, it leads to the availability of more funds in the market, which leads to a decrease in the interest rate. As the interest rate falls, borrowing becomes cheaper, and this encourages businesses and consumers to borrow more, thereby increasing spending. Hence, the correct answer is C, i.e., the interest rate falls, and spending increases.

If the Fed Increases the Money Supply,the Interest Rate