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Suppose the Federal Reserve decides to increase the money supply. Which statement predicts the most likely effect? (3 points)

Select one:
a. Interest rates will rise, meaning that banks will give fewer loans and prices for goods and services will fall.
b. Interest rates will fall, meaning that banks will give more loans and more businesses can open and hire workers.
c. Interest rates will fall, meaning that prices will rise and businesses will not hire many workers.
d. Interest rates will rise, meaning that people will want to get more loans and prices will rise.

Sagot :

Answer:

Its either A or D I think its D tho

Explanation:

An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed. The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, the compounding frequency, and the length of time over which it is lent, deposited, or borrowed.

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The answer is money will decrease, meaning that banks will give fewer loans and prices for goods and services will fall.

This is because higher interest rates means that it is more expensive to borrow money and therefore fewer people and businesses will request loans. This tends to put downward pressure on demand for goods and services which in turn tends to put a downward pressure on prices.
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