Question

Select all that apply.

Select the items that describe what is most likely to happen when the Federal Reserve decreases the money supply.

a. interest rate rises

b. individuals borrow less money

c. businesses make fewer investments

d. the economy grows

Answer 1

When the federal reserve decreases cash supply, interest rates rise.

Answer 2

Interest rate rises and businesses make fewer investments.

Step-by-step explanation:

Due to the absence of money, people need to borrow, this demand causes interest rate rises (Law of demand and supply).

Also, businesses make fewer investments because liquidity is low.

Liquidity refers to the ability to transforms active in money.