After the money supply decreases, which of the following would most likely decrease as well?
A) planned investment, because interest rates increase
B) planned investment, because interest rates decrease
C) government spending, because interest rates increase
D) government spending, because interest rates decrease

Question

After the money supply decreases, which of the following would most likely decrease as well?  
A) planned investment, because interest rates increase 
B) planned investment, because interest rates decrease 
C) government spending, because interest rates increase 
D) government spending, because interest rates decrease

Quizplus · Accepted Answer

When money supply decreases, interest rates increase as the demand for credit exceeds the supply. As a result, planned investment decreases because it becomes more expensive for individuals and businesses to borrow money for investment purposes.

After the Money Supply Decreases, Which of the Following Would