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Suppose the Fed decides to decrease the money supply. Decide what will happen to the prices, interest rates GDP (or income) and value of the US Currency?

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Suppose the Fed decides to decrease the money supply. Decide what will happen to the prices, interest rates GDP (or income) and value of the US Currency?
Answered Same Day Dec 23, 2021

Solution

Robert answered on Dec 23 2021
127 Votes
Suppose the Fed decides to decrease the money supply. Decide what will happen to the prices,
interest rates GDP (or income) and value of the US Cu
ency?
Answer:
When Fed reduces the money supply, there will be excess demand for money at the existing
interest rate in the money market. So there will be pressure on interest rate to rise and hence
interest rate will...
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