6
AssignmentMultiple Choice

Monetary Policy: The Federal Reserve

Question 6 • IL-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
Borrowing will decrease.
B
Interest rates will decrease.
C
Investing will decrease.
D
Inflation will decrease.

Explanation

When banks have more money available to lend, they can offer loans more readily. This increased supply of loanable money tends to lower the cost of borrowing, so interest rates decrease. Therefore, the correct choice is “Interest rates will decrease.”

AI-written and checked against the verified answer.

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