If the Federal Reserve made the decision to decrease the money supply in the United States,this would lead to:

Question

Quizplus · Accepted Answer

When the Federal Reserve decreases the money supply, it leads to a decrease in the supply of dollars in circulation. This, in turn, leads to an appreciation of the U.S. dollar as there are fewer dollars available in the market. An appreciation of the U.S. dollar leads to an increase in the relative price of U.S. exports as they become more expensive to foreign buyers. Finally, a decrease in the money supply would lead to a decrease in aggregate demand (AD) as there is less money available for spending and investment, which will ultimately result in an overall decrease in economic activity.

If the Federal Reserve Made the Decision to Decrease the Money