if the federal reserve decreased the money supply, what would the effects be? check all that…

if the federal reserve decreased the money supply, what would the effects be? check all that apply.\n\ndecreased interest rates\nincreased interest rates\ndecreased borrowing\nincreased borrowing\ndecreased investing\nincreased investing

if the federal reserve decreased the money supply, what would the effects be? check all that apply.\n\ndecreased interest rates\nincreased interest rates\ndecreased borrowing\nincreased borrowing\ndecreased investing\nincreased investing

Answer

Explanation:

Step1: Analyze money supply reduction

A decrease in the money supply shifts the money supply curve to the left, creating a shortage of money at the initial interest rate.

Step2: Determine interest rate effect

To restore equilibrium, the price of money (the interest rate) must rise to encourage people to hold less cash.

Step3: Evaluate borrowing impact

Higher interest rates increase the cost of loans, which discourages consumers and businesses from taking out new debt.

Step4: Evaluate investment impact

As the cost of capital increases due to higher interest rates, the expected return on many investment projects falls below the cost of borrowing, leading to a reduction in business investment.

Answer:

increased interest rates decreased borrowing decreased investing