Which of the following will most likely to happen if Federal Reserve Bank decreases the money...
Which of the following will most likely to happen if Federal Reserve Bank decreases the money supply?
- Interest rates to decrease
- Consumption and investment to decrease
- Inflation to fall
-
I and II only
-
I, II, and III
-
I only
-
II and III only
Homework Answers
II and III only
I is incorrect- Interest rates increase due to lesser supply of money
II is correct- Due to higher interest rates, demand for money decreases
II is correct: Due to lesser demand for money and thereby goods, the prices of the goods decline.
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