If the economy is at full employment, prices are likely to fall when the money supply is decreased.

Question

Quizplus · Accepted Answer

When the money supply is decreased, it typically leads to higher interest rates, which can reduce spending and investment. However, if the economy is at full employment, reducing the money supply is more likely to slow down inflation rather than cause prices to fall, as demand for goods and services remains strong due to the high employment level.

If the Economy Is at Full Employment, Prices Are Likely