When a country's central bank decreases the money supply, which of the following best predicts the consequences?

Question

Quizplus · Accepted Answer

When a country's central bank decreases the money supply, it reduces the amount of money available in the economy. This results in a decrease in demand, which leads to lower prices. Additionally, a decrease in the money supply will make the currency more valuable, resulting in an appreciation relative to other currencies in the world. Therefore, the best prediction of the consequences of decreasing the money supply is that the price level falls, and the currency appreciates relative to other currencies in the world, which is option B.

When a Country's Central Bank Decreases the Money Supply, Which