Question

Suppose the Federal Reserve raises interest rates. Which statement predicts the most likely effect? The money supply will decrease, meaning that banks will give fewer loans and prices for goods and services will fall. The money supply will decrease, meaning that people will buy more goods and services and prices will rise. The money supply will increase, meaning that people will want more loans and more businesses can open and hire workers. The money supply will increase, meaning that prices will rise and businesses will not hire many workers.

Answer 1

A

Explanation: Its A

Answer 2

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 increases the money supply, economic growth and the rate of inflation. ... So, a higher reserve rate means the banks have to keep more cash on hand, decreasing the money supply.