2
QuizMultiple Choice

Monetary Policy: The Federal Reserve — Quiz

Question 2 • Economics

If the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of banks having more money to lend?

Answer
A
Investing will decrease.
B
Interest rates will decrease.
C
Borrowing will decrease.
D
Inflation will decrease.

Explanation

When banks have more money available to lend, they can offer more loans to borrowers. This greater supply of loanable money tends to lower the cost of borrowing, which is the interest rate. Therefore, interest rates will decrease; borrowing and investing are more likely to increase, not decrease.

AI-written and checked against the verified answer.

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