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.

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.

sealake101 · Answer

Welcome to QC! So what do you know you can eliminate from your answer choices?