Decreases in the money supply cause higher interest rates and a negative demand shock.

Name: Decreases in the money supply cause higher interest rates and a negative demand shock.
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Question

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When the money supply decreases, it reduces the amount of money available for borrowing and lending, which leads to higher interest rates. This makes borrowing more expensive and reduces the demand for loans, causing a negative demand shock.

Decreases in the Money Supply Cause Higher Interest Rates and a Negative