Question

Suppose the Federal Reserve decides to increase the money supply. Which of the following predicts the most likely results?

Interest rates will rise, meaning that banks will give fewer loans and prices for goods and services will fall.

Interest rates will fall, meaning that banks will give more loans and more businesses can open and hire workers.

Interest rates will fall, meaning that prices will rise and businesses will not hire many workers.

Interest rates will rise, meaning that more people will buy goods and services and prices will rise.