A decrease in the supply of money generally leads to a decrease in:
A) the level of prices.
B) output and employment.
C) output, employment, and the level of prices.
D) the level of prices, followed by an increase in output and employment.

Question

Quizplus · Accepted Answer

A decrease in the supply of money makes it more difficult for businesses to borrow money to invest and for consumers to borrow money to buy goods and services. This leads to a decrease in output and employment.

A Decrease in the Supply of Money Generally Leads to a Decrease