A decrease in the money supply is likely to cause a(n)_____ in borrowing,a(n)_____ in interest rates,and a(n)_____ in aggregate demand.

Question

Quizplus · Accepted Answer

When the money supply decreases, the cost of borrowing increases. This is because when there is less money available to lend, lenders can charge higher interest rates. Higher interest rates discourage borrowing, which reduces aggregate demand.

A Decrease in the Money Supply Is Likely to Cause