Question

if the federal reserve decreased the money supply, what would the effects be? check all that apply
decreased interest rates
increased interest rates
decreased borrowing
increased borrowing
decreased investing
increased investing

Explanation:

When the Federal Reserve reduces the money supply, the supply of loanable funds shrinks. Following the law of supply and demand for credit, this scarcity drives up interest rates. Higher interest rates make borrowing more expensive, so businesses and consumers reduce borrowing. With less borrowing and higher costs of capital, businesses cut back on investment projects.

Answer:

• increased interest rates
• decreased borrowing
• decreased investing