Final answer:
Individuals holding onto money can indirectly decrease the money supply, while a rise in the supply of loanable funds increases loan quantity. Rapid increases in the money supply by the Federal Reserve can raise GDP and lower unemployment short term but may lead to inflation long term.
Step-by-step explanation:
Individuals' decisions to hold money do not directly alter the money supply, which refers to the total amount of money available in the economy. However, they can influence the money supply indirectly. When individuals choose to hold onto money rather than depositing it in a bank, they decrease the amount of reserves banks have available to make loans. As a result, through the mechanism of the money multiplier, the potential for bank lending and money creation is reduced, and thus, the decision to hold onto money can lead to a decrease in the overall money supply indirectly (option D).
Regarding an increase in the quantity of loans made and received, a rise in supply of loanable funds would typically lead to an increase in the quantity of loans, as more funds are available for borrowers (option C). Conversely, when the Federal Reserve increases the supply of money rapidly, it might lead to a rise in Gross Domestic Product (GDP) in the short term and potentially reduce unemployment. However, over the longer term, a higher rate of increase in the money supply could also lead to higher rates of inflation.