Question

Continuing on the same train of​ thought, when the Fed decreasesdecreases the growth rate of the money​ supply, the price level effect drives the interest rate ▼

down/up
while the expected inflation rate pushes the interest rate ▼
down/up

Answer 1

The answers are:

1. down
2. down

Step-by-step explanation:

When the general prices level in an economy decreases (following a decrease in the money supply), the current inflation rate and the expected future inflation rate both decrease. If the expected inflation rate decreases, interest rates will also decrease.