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What happened when the Federal Reserve limited the money supply?

The slow release of money kept the value of the US dollar high.
The limited access to currency stifled business growth.
The value of stocks slowly recovered with the tight-fisted policy.
More money went into business rather than into the stock market.

asked
User Brayan
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2 Answers

5 votes

Answer:

The limited access to currency stifled business growth.

Step-by-step explanation:

answered
User Kursat Sonmez
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7.7k points
5 votes

The correct answer is: "The limited access to currency stifled business growth."

When the money supply is limited, there is scarcity in the money market and the interest rate (the price of money) rises. Therefore, through this price adjustment, equilibrum is reached in the market again.

High interest rates disincentivate investment because borrowing funds to finance new projects has become relatively more expensive. Therefore, businesses will not conduct expansion policies under this scenario.

answered
User Volpav
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